Which product would you recommend the bank invest in and why

Assignment Help Financial Management

Reference no: EM13936483

ExBank has an opportunity to deploy $1.125 billion of its capital to two new loan products. The revenues of product 1 and 2 are $60 mil- lion and $100 million, respectively. Operating costs of product 1 and 2 are the same at $10 million, both products have identical funding costs of $30 million, and expected losses for product 1 and 2 are $15 million and $45 million, respectively. The bank is required to hold 4 percent capital on products 1 and 2. The bank estimates its economic capital on product 1 to be $25 million and for product 2 to be $90 million. The bank's target hurdle rate is 20 percent. Which product would you recommend the bank invest in and why?

Reference no: EM13936483

Questions Cloud

What type of analysis has the risk team performed : What type of analysis has the risk team performed and how do you arrive at this answer? If you were a board member, what issues might you have with this way of reporting VaR?

Goal-seeking analysis and simulation : Perform a what-if analysis to determine the maximum total profit that could be achieved if only rye (no wheat) is planted, given the cost and time constraints.

Explain why issue of global warming effects on the ecosystem : Identify sources of information that can be useful to oppose information on this issue. What would be a good title name that will present this topic?

Occurred risk likelihood and risk impact : Name of the threat description when and where it occurred risk likelihood and risk impactHow the threat attacks the system

Which product would you recommend the bank invest in and why : The bank estimates its economic capital on product 1 to be $25 million and for product 2 to be $90 million. The bank's target hurdle rate is 20 percent. Which product would you recommend the bank invest in and why?

What parasites might the physician have suspected : What bacterial pathogens should be included in the screening of a routine stool culture, and how would the clinical laboratory scientist processing the culture recognize these potential pathogens?

Network requirements of the user and design : Create the designed file and folder structure using appropriate administration and system tools. Document the file system using a security matrix.

Infrastructure as a service (iaas) from a cloud service : An organization is planning to use Infrastructure as a Service (IaaS) from a cloud service provider to host their web site and e-commerce applications. This will consist of an appropriate number of suitably sized Linux Virtual Servers and Virtual ..

Why alcoholic acidity is determined : Why alcoholic acidity is determined and ash content is important factor in wheat flour?

User Account

All Pages