Consider the Following Scenario: an FI Charges a 0

Multiple Choice

Consider the following scenario: an FI charges a 0.5 per cent loan origination fee and imposes a 10 per cent compensating balance requirement to be held as non-interest bearing demand deposits. It further sets aside reserves held at the central bank. The value of these reserves is 15 per cent of deposits. What is the base lending rate if the credit risk premium is 3.055 per cent and the ROA on the loan is 17 per cent?

A) 11.5 per cent
B) 13.945 per cent
C) 12 per cent
D) 20.055 per cent