Calculate the loan risk associated with a $2 million, five-year loan to a BBB-rated corporation in the computer parts industry that has a duration of 6.4 years. The cost of funds for the bank is 8 per cent. Based on four years of historical data, the bank has estimated the maximum change in the risk premium on the computer parts industry to be approximately 4.0 per cent. The current market rate for loans in this industry is 9 per cent. Note : Ignore the $ sign and the comma separator when writing your answer eg. $35,250 should be written as 35250.

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