1. You should know what is a loan commitment, a spot loan, a fixed rate loan and a floating rate loan and US language equivalents.

1. Aldis Bank has made a loan to Hammer Corporation. The loan terms include a default risk-free borrowing rate of 9 percent, a risk premium of 3 percent, an origination fee of 0.1750 percent, and a 9 percent compensating balance requirement. Required reserves at the Fed are 6 percent. What is the expected or promised gross return on the loan?

Formula is

of + (BR + )

1 + k = 1 + ____________________ Find k

1 - [ b(1 - RR)]