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Question
The bank has determined the information below for one of its customers. This customer wants to borrow $1,000,000 but will maintain an average deposit balance in its account of $200,000. What is the expected net rate of return on this loan?
| Expected Revenues | Expected Costs | ||
| Interest Revenues | $1,000,000 | Deposit Interest | $30,000 |
| Commitment Fee | $15,000 | Cost of Other Funds Raised | $890,000 |
| Deposit Service Fees | $5,000 | Loan Processing Costs | $8000 |
| Agency Fees | $6000 | Activity and Record Keeping Costs | $16,000 |
A) 10.00 percent
B) 8.20 percent
C) 10.25 percent
D) 13.75 percent
E) None of the above
Answer
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