Confidence Bank Has Made a Loan to Risky Corporation

question 78

Multiple Choice

Confidence Bank has made a loan to Risky Corporation.The loan terms include a default risk-free borrowing rate of 8 percent, a risk premium of 3 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)11.19 percent.
• B)11.90 percent.
• C)12.29 percent.
• D)12.02 percent.
• E)12.22 percent.

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