The bank has determined the information below for one of its customers.This cust

Question

The bank has determined the information below for one of its customers.This customer wants to borrow $1,000,000 but will maintain an average deposit balance in its account of $200,000 What is the expected net rate of return on this loan? cted Revenues cted Costs Interest Revenues Commitment Fee Deposit Service Fees Agency Fees $1,000,000 $15,000 $5,000 $6000 Deposit Interest Cost of Other Funds Raised Loan Processing Costs Activity and Record Keeping Costs $30,000 $890,000 $8000 $16,000 A) 10.00 percent B) 8.20 percent C) 10.25 percent D) 13.75 percent E) None of the above Answer:C

Explanation / Answer

Return=Revenues-Costs/(Loan-Deposit Balance)=((1000000+15000+5000+6000)-(30000+890000+8000+16000))/(1000000-200000)=82000/800000=10.25%

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