The CEO wants your CRO opinion on the attractiveness of a large loan opportunity with a healthcare comp

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The CEO wants your CRO
opinion on the attractiveness of
a large loan opportunity with a
healthcare company benefiting from
the current vaccination business. The
bank’s threshold cost of capital is 10%. The loan proposal is for
an outstanding amount of $1,500m. Pricing is estimated at 1.20%,
net of funding costs. The RWA risk-weight is assumed to be 65% of
the exposure amount and the credit
expected loss 1%. You may
consider operating costs, tax charges, and
any other elements to be
immaterial.
(e) Compute the RAROC of the deal and conclude whether
it is accretive.
(10 marks)