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Explanation:
Using the matched-maturity marginal cost of funds approach, the funding liquidity risk charge for an amortizing loan can be calculated as the maturity-weighted average of the liquidity premiums.
The weights correspond to the time periods (maturities).
Numerator =
Numerator = $6 + 28 + 54 + 96 + 135 + 192 = 511\sum t = 1 + 2 + 3 + 4 + 5 + 6 = 21511` / 21 = 24.33$ bps.
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Q.72 Given that a six-year amortizing bullet loan in recent times has the following annual liquidity premiums: 6, 14, 18, 24, 27, 32. Use the matched-maturity marginal cost of funds approach to calculate the charge of funding liquidity risk of this loan.
A
511.00 bps
B
42.33 bps
C
33.43 bps
D
24.33 bps