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cloveb cloveb
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Posts: 782
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7 years ago
A bank charges an interest rate of 8% per annum on a loan, and there is no other fee charged. Its cost of obtaining the funding for this loan is 5% per annum. According to the historical data, 50% of borrowers with similar characteristics defaulted when there was an adverse credit scenario, and typically the lenders were able to recover only 60% of loan amount on average once borrowers defaulted in those adverse credit scenarios. What is the Risk-Adjusted-Return-on-Capital of this loan if we use historical loan loss under the adverse credit scenario as the estimate of loan risk?

A. 40%
B. 25%
C. 15%
D. 10%
E. 3%
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bolbolbolbol
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7 years ago
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