Calculate the dollar amount of total

Reference no: EM133632620

Question: A Financial Institution (FI) has issued a one-year loan commitment of $3 million for an up-front fee of 25 basis points. The back-end fee on the unused portion of the commitment is 10 basis points. The FI's base rate on loans is 7.5 percent and the loan to this borrower carries a risk premium of 2.5 percent. The FI requires a compensating balance on loans of 5 percent. Reserve requirement on demand deposit is 8 percent.

Required:

a. If the borrower draws down 75 percent of the commitment at the beginning of the year, Calculate the dollar amount of total (up-front and back-end) fee income, interest income, compensating balance, reserve requirement on deposits, Funds committed (used by borrower) and the expected return on the loan (without taking future values into consideration).

b. If the borrower draws down 75 percent of the commitment at the beginning of the fourth month, what is the expected return on the loan (without taking future values into consideration)?

c. Suppose that the expected return of loan commitments issued by this FI is 10.85% and the yield of Treasury bond is 7%, what are the probability of repayment and the probability of default of this loan commitments?

Reference no: EM133632620

Questions Cloud

Which nursing interventions is most appropriate for patient : Through Bookmark User Note Feedback A patient arrives following prolonged exposure. Which nursing interventions is most appropriate for this patient?

How can you determine the cheaper option : Compare the product of ($750 × 6) to $1,582 b. Compare the quotients of ($750 ÷ 6) and ($1,582 ÷ 12)

Discuss the ethical implications of one of recommendations : Discuss the ethical implications of one of the recommendations and what it means to the nurse, the patient, the health care environment and system.

It charged investors a performance : Its benchmark return is zero. Its standard deviation was lower than that of the index. Its Sharpe ratio was higher than that of the index

Calculate the dollar amount of total : Calculate the dollar amount of total (up-front and back-end) fee income, interest income, compensating balance, reserve requirement on deposits

Which statement will the nurse make before assessing : Which statement will the nurse make before assessing if the client is a victim of intimate partner violence (IPV)?

David plans to make no other deposits or withdrawals : David plans to make no other deposits or withdrawals. How many years will it take David's account balance to double

What should be the nurses first intervention : A 13-hour-old newborn is brought to the nursery for circumcision. What should be the nurse's first intervention to prepare the newborn for the procedure?

Determine which offer harrison should choose : Assuming that a 8% interest rate is appropriate and that all maintenance and insurance costs are paid at the end of each year, determine which offer Harrison

User Account

All Pages