Risk premium to counter the effect of default risk

Reference no: EM133538330

Question: A bank wants to implement a loan pricing model and has to look at several variables to consider. Please select the variable that is incorrectly described. a. Cost of funding that include the cost of bonds issued. b. Operating costs that include the cost of interest paid to depositors. c. Risk premium to counter the effect of default risk. d. A profit margin to provide the bank with an adequate return on capital.

Reference no: EM133538330

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