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What is the anticipated return on this loan

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Question - Bank A has offered a loan with a 6% base rate and 20 BP fees. The Firm has a low credit rating; thus there will be a 2.5% credit premium on the loan. The Bank imposes a 5% compensating balance requirement. The Fed requires a 10% Reserve Requirement.

a) What is the anticipated return on this loan? Round your answer to four decimal places.

b) If the 90-day T-Bill rate is 1.75%, what is the anticipated probability of repayment on this loan? Round your answer to four decimal places.

Reference no: EM132172327

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