VUESLIULIS PULLS 34. A bank is planning to make a loan of $12,550,000 to WinStar Farms. It expects to charge an up- front fee of 0.3 percent and a servicing fee of 35 basis points. The loan has a maturity of 18 years with duration of 10.2 years. The cost of funds (the RAROC benchmark) for the bank is 4.4 percent. Assume the bank has estimated the change in the credit risk premium on the thoroughbred breeding farm sector to be approximately 4.6 percent, based on the last 24 months of historical data. The current market interest rate for loans in this sector is 8.8 percent. (That is, the percentage change in the credit risk premium, %AR is 4.23%). What is RAROC? A) 8.8% B) 1.765% C) 11.7% D) 6.63% E) 34.947% 0