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fn 196 Question 1 Problem Solving A bank is considering a new application for a loan submitted by one of its customers. Assume that the bank would borrow at 13% and lend to its client at 2.3%. In addition, the bank has vari to collect on the loan (0.05% of the loan amount net of expenses) per year. The duration of the loan is 9 years and ARI+RL) is equal to 1.5%. The loan amount is 1,000,000 AED. Questions: 1. Calculate the RAROC of the loan. 2. Would the bank add the loan to its portfolio or reject it if we assume that its hurdle rate (return on equity) is equal 10% Formulas: RAROC - Income from loan for one year / Capital at risk AL-D'L(ARXIURL)) For the toolbar, press ALT+F16 IP) or ALT+FNF10 (M) BIUS Paragraph Arial 14px A IXO a 6 NAS 80 F A % 5 $ 4 & 7 2 3 E 6 v 8 9 fn 196 Question 1 Problem Solving A bank is considering a new application for a loan submitted by one of its customers. Assume that the bank would borrow at 13% and lend to its client at 2.3%. In addition, the bank has vari to collect on the loan (0.05% of the loan amount net of expenses) per year. The duration of the loan is 9 years and ARI+RL) is equal to 1.5%. The loan amount is 1,000,000 AED. Questions: 1. Calculate the RAROC of the loan. 2. Would the bank add the loan to its portfolio or reject it if we assume that its hurdle rate (return on equity) is equal 10% Formulas: RAROC - Income from loan for one year / Capital at risk AL-D'L(ARXIURL)) For the toolbar, press ALT+F16 IP) or ALT+FNF10 (M) BIUS Paragraph Arial 14px A IXO a 6 NAS 80 F A % 5 $ 4 & 7 2 3 E 6 v 8 9