Suppose that a bank does the following: a. Sets a loan rate on a prospective loan with BR = 4.23% and ϕ = 3.16%. b. Charges a 0.33 percent loan origination fee to the borrower. c. Imposes a 9 percent compensating balance requirement to be held as noninterest-bearing demand deposits. d. Holds reserve requirements of 8 percent imposed by the Federal Reserve on the bank’s demand deposits. Calculate the bank’s ROA on this loan
Suppose that a bank does the following: a. Sets a loan rate on a prospective loan with BR = 4.23% and ϕ = 3.16%. b. Charges a 0.33 percent loan origination fee to the borrower. c. Imposes a 9 percent compensating balance requirement to be held as noninterest-bearing demand deposits. d. Holds reserve requirements of 8 percent imposed by the Federal Reserve on the bank’s demand deposits. Calculate the bank’s ROA on this loan
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 19P
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Suppose that a bank does the following:
a. Sets a loan rate on a prospective loan with BR = 4.23% and ϕ = 3.16%.
b. Charges a 0.33 percent loan origination fee to the borrower.
c. Imposes a 9 percent compensating balance requirement to be held as noninterest-bearing demand deposits.
d. Holds reserve requirements of 8 percent imposed by the Federal Reserve on the bank’s demand deposits.
Calculate the bank’s ROA on this loan.
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