20 points Te Ar CLO 20 markal A berka planning to make a loan of $10 million to a firm in the textile industry. The duration of the loan to be approved is four years. The 9 percentile increase in risk premium for bonds belonging to the same rss category of the inan has been estimated to be 5.5 percent In addition, the bank expects to charge a fee income on this loan of 0.5 percent and a spread over the cost of funds of 1 percent. Finally, the cost of funds (the RAROC benchmark) for the 1-Compute the loan risk if the current average level of interest rates for this category of bonds is 10 percent? 15 markal 2. Using the RAROC model, determine whether the bank should make the loan? Justify your answer [10 marks) 3- What should be the duration in order for this loan to be approved? [5 marks] For the toolbar, press ALT-F10 (PC) or ALT-FN-F10 (Ma BIVS Paragraph Arial 4 10pt LV I. X 52 *** xx 8 AS. EB BEE 11 EE 40 B 8.8 F (1)