The CEO wants your CRO opinion on the attractiveness of a large loan opportunity with a healthcare comp
Posted: Sun Apr 17, 2022 6:27 pm
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)
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)