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Using the following information, calculate the risk-adjusted return. Loan Amount: $10,000,000 Interest Rate: 5.0% Cost of Funds: 2.75% Fees: 10,000 Expenses: 5,000 Loss Given Default
- Using the following information, calculate the risk-adjusted return.
- Loan Amount: $10,000,000
- Interest Rate: 5.0%
- Cost of Funds: 2.75%
- Fees: 10,000
- Expenses: 5,000
- Loss Given Default Rate: 25%
- Default Probability: 0.5%
- Using the following information, calculate the risk-adjusted capital.
- Loan Amount: $10,000,000
- Capital Requirement: 12%
- Capital Ratio: 25%
- Using the following information, calculate the RAROC.
- 33.33%
- 28.75%
- 38.25%
- 35.56%
- Using our risk rating and profitability model, compare two scenarios regarding a loan issuance. Compare the ratios of the two scenarios below:
Scenario 1 | Scenario 2 | |
Debt Service Coverage Ratio | 1.89 | 5.19 |
Adjusted EBITDA/Interest | 8.85 | 9.09 |
Debt/Equity | 0.86 | 0.86 |
Total Liabilities/Tangible Net Worth | 1.78 | 1.78 |
Current Ratio |
- If the company's balance sheet is the same for both scenarios, what could have caused the changes in the ratios for Scenario 2?
- A higher loan amount in any of the loans.
- Longer amortization period in the loans.
- Higher interest rates charged for any of the loans.
- A smaller loan amount in any of the loans.
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