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Question
Confidence Bank has made a loan to Risky Corporation. The loan terms include a default risk-free borrowing rate of 8 percent, a risk premium of 3 percent, an origination fee of 0.1875 percent, and a 9 percent compensating balance requirement. Required reserves at the Fed are 6 percent. What is the expected or promised gross return on the loan?
A. 11.19 percent.
B. 11.90 percent.
C. 12.29 percent.
D. 12.02 percent.
E. 12.22 percent.
Answer
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