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What is the bank implied return of return on equity

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Reference no: EM132950839

Refer to the information below for a bank lender:

Administrative/operating cost 0.10%

Expected loss: 0.50%

Regulatory risk weight for the bank asset (Loan): 102%

Regulatory capital ratio (equity/RWA): 8.00%

Bank's funding cost: 5.00%

Bank's interest rate spread: 1.7%

Bank's required rate of return on equity: 20%

Problem 1: What is the bank's implied return of return on equity (pre-tax)?

Reference no: EM132950839

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