What is the expected rate of return to the bank

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A corporate customer obtains a $1.5 million loan from a bank. The customer agrees to pay a 7.25 percent interest rate and agrees to make compensating balances of 4 percent of the loan amount. These will be held in noninterest-bearing transactions deposits at the bank for one year. The bank charges a 1 percent loan origination fee on the amount borrowed. Reserve requirements are 10 percent. What is the expected rate of return to the bank (k) (to the nearest basis point)?

Reference no: EM131622069

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