The Metrobank offers one year loans of $1,000,000 each with a stated rate of 9%, charges a % loan origination fee, imposes a 10% compensating balance requirement, and must hold a 6% reserve requirement against the compensating balance requirement with the Federal Reserve Bank of Chicago. What is the return to the bank on this loan? Today, the Federal Reserve System has dropped the reserve requirement ratio to zero. Compute the return to the bank on this loan under this change in the reserve requirement ratio.  

Answer rating: 100% (QA)

To calculate the return to the bank on the loan under both scenarios we need to consider the interes... View the full answer