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Question
A bank has a base loan rate of 4.75% and for the loan under consideration it would apply a 2% risk premium. The bank also requires compensating balances (non-interest-bearing) equal to 5% of the loan amount. The bank's reserve requirements are 10%. The bank charges 1% of the loan amount as an origination fee. The borrower is asking for a $500,000 loan. Calculate the ROA on the loan.
Answer
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Related questions
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