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Youre working for a bank and considering a loan application from a borrower looking for $10,000 for one year. Based on your bank's risk models,
Youre working for a bank and considering a loan application from a borrower looking for $10,000 for one year. Based on your bank's risk models, you believe there are three possible outcomes a There's a 0.45 chance they pay you back everything they owe you including interest b. There's a 0.3 chance they pay you back half of what they owe you plus the bank gets any collateral they put up c. Or they pay you back nothing, but the bank still gets the collateral if there is no collateral (mis is an unsecured loan), what interest rate where 0.01 = 1%, 1-100%, etc) do you charge to ensure that your risk adjusted rate of return is 19? QUESTION 3 Youre working for a bank and considering a loan application from a borrower looking for $10,000 for one year. Based olevour bank's nsk models, you believe there are three possible outcomes a There's a 0.45 chance they pay you back everything they owe you including interest b. There's a 0 3 chance they pay you back half of what they owe you plus the bank gets any collateral they put up Or they pay you back nothing, but the bank still gets the collateral Your boss wont let you offer loans at any interest rate above 30%. What is the value of collateral you need to be able to lower the interest rate to 0.37
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