1. Confidence Bank has made a loan to Risky Corporation. The loan terms include a default risk-free borrowing rate of 8 percent, a risk premium of 3 percent, an origination fee of 0.2875 percent, and a 9 percent compensating balance requirement. Required reserves at the Fed are 6 percent. What is the expected or promised gross return on the loan?

11.19 percent.

11.90 percent.

12.24 percent.

12.33 percent.

12.22 percent.

2. ABC, Inc. has a beginning receivables balance on January 1st of $650. Sales for January through April are $410, $440, $520 and $540, respectively. The accounts receivable period is 60 days. How much did the firm collect in the month of March? Assume that a year has 360 days.

$540

$650

$520

$410

$440