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What is the expected return on the loan

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Question - Bronte Bank is charging a 15 percent interest rate on a $3,000,000 loan. The bank also charged $50,000 in fees to originate the loan. The bank has a cost of funds of 8 percent. The borrower has a 7 percent chance of default, and if default occurs, the bank expects to recover 85 percent of the principal and interest. What is the expected return on the loan and the risk on the loan using the Moody's Analytics Portfolio Manager model?

Reference no: EM133036423

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