Consider the Following Scenario: an FI Charges a 0

question 34

Multiple Choice

Consider the following scenario: an FI charges a 0.5 per cent loan origination fee and imposes a 10 per cent compensating balance requirement to be held as non-interest bearing demand deposits. It further sets aside reserves held at the central bank. The value of these reserves is 15 per cent of deposits. What is the base lending rate if the credit risk premium is 3.055 per cent and the ROA on the loan is 17 per cent?

• A) 11.5 per cent
• B) 13.945 per cent
• C) 12 per cent
• D) 20.055 per cent

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Definitions:

Cognitive Theory

A theory of psychology that emphasizes internal states, such as motivation, problem-solving, decision-making, and perception, in understanding behavior.

Observable Behaviors

Actions or reactions of an individual in various situations, which are visible and can be scientifically recorded or analyzed.

Cultural Influence

The impact that the shared beliefs, values, norms, and practices of a culture have on the attitudes and behaviors of its members.

Evolutionary Theory

A scientific explanation for the diversity of life, proposing that species change over time through processes like natural selection and mutation.