Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

A Financial Institution has issued a one-year loan commitment of $3 million for an up-front fee of 25 basis points. The back-end fee on the unused portion of the commitment is 10 basis points. The FI requires a compensating balance of 6 percent as demand deposits. The FI's cost of funds is 7 percent, the interest rate on the loan is 11 percent, and reserve requirements on demand deposits are 8 percent. The customer is expected to draw down 80 percent of the commitment at the beginning of the year.

a. What is the expected return on the loan without taking future values into consideration?

b. What is the expected return using future values? That is, the net fee and interest income are evaluated at the end of the year when the loan is due?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M938648

Have any Question? 


Related Questions in Basic Finance

1 describe four types of invalidity that can be found in

1. Describe four types of invalidity that can be found in experimental research designs. 2. What are extraneous and confounding variables? Which type of variable is most dangerous to the statistical conclusion validity a ...

Compare and contrast the physical and risk characteristics

Compare and contrast the physical and risk characteristics of Treasury debt securities with municipal securities. What are the advantages and disadvantages of each for the borrower? What are the advantages and disadvanta ...

1 at whose discretion is the decision to make a disaster

1. At whose discretion is the decision to make a disaster declaration? 2. What is the National Response Framework? 3. How does the National Response Framework compare to its predecessors, the National Response Plan and t ...

1 what are the advantages to a home buyer of a graduated

1. What are the advantages to a home buyer of a graduated payment mortgage? 2. What is the major constraint on lenders in setting new interest rates for an adjustable rate mortgage? 3. Discuss the quality of the major in ...

1 discuss uncertainty as it relates to the overall

1. Discuss uncertainty as it relates to the overall logistical performance cycle. Discuss and illustrate how performance cycle variance can be controlled. 2. What is the logic of designing echeloned logistical structures ...

In todays rapidly changing and competitive business world

In today's rapidly changing and competitive business world, it is in important to stay current with financial news and events. Visit a financial-related website like Forbes.com, CNNMoney.com, TheStreet.com, Bloomberg.com ...

1 discuss the pros and cons of using naturalistic versus

1. Discuss the pros and cons of using naturalistic versus contrived observation. 2. What special opportunities and problems does participant observation create for researchers? 3. What does it mean if a behavior is react ...

Explain how a swaption can be terminated at expiration by

Explain how a swaption can be terminated at expiration by either exercising it or settling it in cash. Why are these procedures financially equivalent? Explain how the two types of swaptions are like interest rate option ...

Level a basic a1-a17 - a1 bond valuation a 1000 face value

LEVEL A BASIC A1-A17 - A1. (Bond valuation) A $1,000 face value bond has a remaining maturity of 10 years A1. (Bond valuation) A $1,000 face value bond has a remaining maturity of 10 years and a required return of 9%. Th ...

There are 6 books in the billy madison seriesa how many

There are 6 books in the Billy Madison series. (a) How many different ways can April arrange the 6 books in her book shelf? (b) April plans on bringing three of the six books with her in a road trip. How many different w ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro