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Question
The duration of a soon to be approved loan of $10 million is four years. The 99th percentile increase in risk premium for bonds belonging to the same risk category of the loan has been estimated to be 5.5 percent.
What is the estimated risk-adjusted return on capital (RAROC) of this loan.
A. 6.36 percent.
B. 7.00 percent.
C. 7.13 percent.
D. 10.55 percent.
E. 25.45 percent.
Answer
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