A company wants to borrow six million dollars for one year. Various aspects of the loan is

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A company wants to borrow six million dollars for one year. Various aspects of the loan is as under:

1. Equity to loan ratio is 8%

2. Reserve requirement is 125

3. The average cost of deposit is 6% and the average cost of equity is 22%.

4.insurance cost is 25 bps.

Required: Calculate the cost of funding as explained in the class with all necessary steps. Give the cost as a percentage of the loan amount. Derive the interest rate by adding four percentage point to the cost of funding. Bank's spread and the separate balance sheet for this loan.

Posted Date: May 18, 2024 08:08 PM

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A company wants to borrow six million dollars for one year. Various aspects of the loan is

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