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Homework answers / question archive / Confidence Bank has made a loan to Risky Corporation

Confidence Bank has made a loan to Risky Corporation. The loan terms include a base lending rate of 7 percent, a risk premium of 6 percent, an origination fee of 0.1875 percent, and a 9 percent compensating balance requirement. Required reserves at the Fed are 6 percent. What is the expected or promised gross return on the loan?

a.

11.13 percent.

b.

11.90 percent.

c.

14.41 percent.

d.

14.56 percent.

e.

12.22 percent.

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