Multiple Choice
Assume a bank grants a loan commitment at an interest rate of 10% per annum and the risk premium on the loan is 2%.The bank charges borrowers an upfront fee on the whole commitment of 0.25% and a back-end fee on any unused proportion of the loan of 0.5%.The compensating balance is 10% and so are reserve requirements.Assume that the average draw-down of the loan is 80% over the time of the loan commitment.What is the promised return on the loan commitment (round to two decimals) ?
A) 12.00%
B) 12.75%
C) 13.23%
D) 13.67%
Correct Answer:
Verified
Correct Answer:
Verified
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