Confidence Bank Has Made a Loan to Risky Corporation

Multiple Choice

Confidence Bank has made a loan to Risky Corporation.The loan terms include a default risk-free borrowing rate of 8 percent, a risk premium of 3 percent, an origination fee of 0.1875 percent, and a 9 percent compensating balance requirement.Required reserves at the Fed are 6 percent.What is the expected or promised gross return on the loan?

A) 11.19 percent.
B) 11.90 percent.
C) 12.29 percent.
D) 12.02 percent.
E) 12.22 percent.