
Explanation:
First, calculate the components of the loan revenues:
Now calculate the loan revenues using the formula:
Loan Revenues = (s + f − l − c) × (1 − x)
= (€37,500 + €15,000 − €20,000 − €15,000) × (1 − 0.3)
= €12,250
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Q.6014 A bank is assessing the profitability of a corporate loan using the Risk-Adjusted Return on Capital (RAROC) methodology. The loan amount is €1,500,000 with an interest rate spread of 2.5% above the bank's cost of funds. The bank charges a loan origination fee of 1%, expects loan losses to be €20,000, and operating costs for the loan are €15,000. If the corporate tax rate is 30%, calculate the numerator of the RAROC (Loan Revenues) for this loan.
A
€15,500
B
€12,250
C
€17,100
D
€17,500
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