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A bank offers one-year loans at a rate of 10%. For a certain segment of customers, the bank also charges a 100 basis point risk premium. This bank charges a .20% loan origination fee and imposes a 9% compensating balance requirement. The bank pays a 5% reserve requirement to the Fed. What is the return to the bank on these loans? If the bank would like to increase their return, what could they do?

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Financial Management, Finance

Category:- Financial Management
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