What is the break-even rate

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Question - A loan of $100 million. Cost of equity: 8%, allocated equity 5%. Maturity 3 years. Corporate tax: 26%. Probability of Default is 1st year = 1%, 2nd year = 3%, 3rd year = 6%. What is the break-even rate and how much the bank should charge for the loan?

Reference no: EM132185187

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