Alice Bank has an ROE objective of 12%, is subject to an average tax rate of...

 

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Alice Bank has an ROE objective of 12%, is subject to an average tax rate of 35%, and provides the following information regarding the loans that it extends to its corporate customers: Liquidity requirement of the bank (as a % of total assets) Yield earned on liquid assets Deposit rate paid by the bank Default probability of the loan Estimated recovery rate Capital adequacy rate Capital adequacy weighting of the loan Administrative costs 6.0% 1.5% b) If not, what else could Alice Bank do to attract the loan? 0.25% 4.5% 68.0% 8.0% 100.0% 2,000$ A particular corporate, customer of Alice Bank, has received an offer for a $25 million for 5 years loan from a competing bank, at a rate of 2.8%. Alice assesses that corporates is that sector usually have a default probability of 4.5% and a recovery rate of 68%. a) Compute the rate whether Alice Bank could beat it to keep its customer? (12 marks) (3 marks) Alice Bank has an ROE objective of 12%, is subject to an average tax rate of 35%, and provides the following information regarding the loans that it extends to its corporate customers: Liquidity requirement of the bank (as a % of total assets) Yield earned on liquid assets Deposit rate paid by the bank Default probability of the loan Estimated recovery rate Capital adequacy rate Capital adequacy weighting of the loan Administrative costs 6.0% 1.5% b) If not, what else could Alice Bank do to attract the loan? 0.25% 4.5% 68.0% 8.0% 100.0% 2,000$ A particular corporate, customer of Alice Bank, has received an offer for a $25 million for 5 years loan from a competing bank, at a rate of 2.8%. Alice assesses that corporates is that sector usually have a default probability of 4.5% and a recovery rate of 68%. a) Compute the rate whether Alice Bank could beat it to keep its customer? (12 marks) (3 marks)

Answer rating: 100% (QA)

a The net interest margin for Alice Bank is NIM 15 025 1 035 0615 The riskadj... View the full answer