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Question
LNW Bank is charging a 12 percent interest rate on a $5,000,000 loan. The bank also charged $100,000 in fees to originate the loan. The bank has a cost of funds of 8 percent. The borrower has a five percent chance of default, and if default occurs, the bank expects to recover 90 percent of the principal and interest.
What is the risk of the loan using the Moody's Analytics model?
A. 4.75 percent.
B. 0.48 percent.
C. 6.89 percent.
D. 2.18 percent.
E. 1.50 percent.
Answer
This answer is hidden. It contains 41 characters.
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