What is the expected rate of return to the bank

Assignment Help Financial Management

Reference no: EM131622069

A corporate customer obtains a $1.5 million loan from a bank. The customer agrees to pay a 7.25 percent interest rate and agrees to make compensating balances of 4 percent of the loan amount. These will be held in noninterest-bearing transactions deposits at the bank for one year. The bank charges a 1 percent loan origination fee on the amount borrowed. Reserve requirements are 10 percent. What is the expected rate of return to the bank (k) (to the nearest basis point)?

Reference no: EM131622069

Questions Cloud

What is the purpose of taxes : What is the purpose of taxes, to raise money for governmental operations or is to be a factor of social policy

Successful implementation of itil in organisations : What are examples of critical success factors (CSFs) that are known to affect the successful implementation of ITIL in organisations?

Results of illegible written communication : We often hear jokes about doctors' handwriting being impossible to read. What do you think could be the results of illegible written communication?

What is the purpose of determining the bep : Comment on the difficulty of calculating the breakeven point ("BEP"). What is the purpose of determining the BEP

What is the expected rate of return to the bank : What is the expected rate of return to the bank (k) (to the nearest basis point)?

Cost of capital to the company for the evaluation of project : If a company uses the cost of capital to the company for the evaluation of each project,

Determine the total costs of collating : Automatic versus Manual Processing - Determine the total costs of collating 500,000 and 1,300,000 per month

The interest rate of the bond have an inverse relationship : "The price of the bond and the interest rate of the bond have an inverse relationship."

Internal rate of return approach to selecting projects : The internal rate of return approach to selecting projects should not be used in all but which of the following situations?

User Account

All Pages