(b) The duration of a soon to be approved loan of $10 million is four years. The 99th percentile increase in risk premiu
Posted: Sat Feb 26, 2022 9:04 am
- B The Duration Of A Soon To Be Approved Loan Of 10 Million Is Four Years The 99th Percentile Increase In Risk Premiu 1 (62.34 KiB) Viewed 48 times
(b) The duration of a soon to be approved loan of $10 million is four years. The 99th percentile increase in risk premium for bonds belonging to the same risk category of the loan has been estimated to be 5.5%. The current average level of interest rates for this category of bonds is 12%. If the fee income on this loan is 0.4% and the spread over the cost of funds to the bank is 1%, calculate the estimated RAROC of this loan.