
Explanation:
The correct answer is C.
Formula.
Hence,
\frac{(\`$120`m - \`$56`m)}{\`$120`m} \times 0.75 \times 0.0032 = 0.00128 \approx 12.8 \text{ bps}Ultimate access to all questions.
Q.4202 A line of credit has a limit of $120 million, in which $56 million has already been drawn. An assumption is made that customer K will draw on the remaining credit with a 75% probability and the cost of term funding assets in the liquidity cushion at 32 bps. Calculate the rate charged for the contingent liquidity risk of the line of credit.
A
5.14 bps
B
1.12 bps
C
12.8 bps
D
1.28 bps
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