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Assume a $500 000 Loan Has a Duration of 2

Question 38

Multiple Choice

Assume a $500 000 loan has a duration of 2.5 years. The current interest rate level is 10 per cent and a sudden change in the credit premium of 1 per cent is expected. Further assume that the one-year income on the loan is $2500. What is the loan's RAROC (round to two decimals) ?


A) 10.00 per cent
B) 11.00 per cent
C) 22.00 per cent
D) 50.00 per cent

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