Moon bank has made a loan to lucky corporation

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Using a modified discriminant function similar to Altman's, Sunshine Bank estimates the following coefficients for its portfolio of loans: Z = 1.4X1 + 1.09X2 + 1.5X3, where X1 = debt to asset ratio; X2 = net income and X3 = dividend payout ratio. What is the Z-score if the debt to asset ratio is 40%, net income is 12%, and the dividend payout ratio is 60%?

Moon Bank has made a loan to Lucky Corporation. The loan terms include a default risk-free borrowing rate of 8%, a risk premium of 3%, an origination fee of 0.1875%, and a 9% compensating balance requirement. Required reserves at the Fed are 6%. What is the expected or promised gross return on the loan?

Reference no: EM132376647

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