A bank is considering expanding its asset management operations. The main risk is operational risk. It estimates that the expected operational risk loss from the new venture in one year is $2 million and the 99.97%

worst-case loss (arising from a large investor law suit) is $40 million. The expected fees it will receive from investors for the funds under administration are $12 million per year and administrative costs are expected to be $5 million per year. Estimate the before-tax RAROC?