Consider the Following Scenario: an FI Charges a 0

question 53

Multiple Choice

Consider the following scenario: an FI charges a 0.5% loan origination fee and imposes a 10% 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% of deposits.What is the base lending rate if the credit risk premium is 3.055% and the ROA on the loan is 17%?

• A)11.5%
• B)13.945%
• C)12%
• D)20.055%

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