Option B is correct.

To find the Risk-Adjusted Return on Capital (RAROC), we evaluate the net income relative to the loan amount, apply the tax rate, and divide by the required economic capital.

1. Calculate Pre-Tax Net Return Margin on the Loan Amount:

• Interest Income Rate = +3.20%
• Interest Expense Rate (Funding Cost) = -0.40%
• Expected Loss Rate = -2.00%
• Operating Costs Rate = -0.50%
• Return on Economic Capital (EC) portion = (Economic Capital %) × (Return on EC) = 10.00% × 1.40% = +0.14%

Pre-Tax Total Return = 3.20% - 0.40% - 2.00% - 0.50% + 0.14% = 0.44%

2. Calculate After-Tax Return Margin:

• Effective Tax Rate = 38%
• After-Tax Total Return = 0.44% × (1 - 0.38) = 0.44% × 0.62 = 0.2728%

3. Calculate RAROC:

• RAROC = (After-Tax Return) / (Economic Capital Required)
• RAROC = 0.2728% / 10.0% = 2.728%

Rounding to two decimal places gives 2.73%, matching Option B.