Suppose that a bank does the following: a. Sets a loan rate on a prospective loan with BR = 8.27% and ϕ = 3.16%. b.
Posted: Sun Jul 03, 2022 12:53 pm
Suppose that a bank does the following:
a. Sets a loan rate on a prospective loan with BR =8.27% and ϕ = 3.16%. b. Charges a 0.35 percent loan origination fee to theborrower. c. Imposes a 5 percent compensating balance requirement to beheld as noninterest-bearing demand deposits. d. Holds reserve requirements of 9 percent imposed by theFederal Reserve on the bank’s demand deposits.
Calculate the bank’s ROA on this loan.
a. Sets a loan rate on a prospective loan with BR =8.27% and ϕ = 3.16%. b. Charges a 0.35 percent loan origination fee to theborrower. c. Imposes a 5 percent compensating balance requirement to beheld as noninterest-bearing demand deposits. d. Holds reserve requirements of 9 percent imposed by theFederal Reserve on the bank’s demand deposits.
Calculate the bank’s ROA on this loan.