b) The Bank Smart Mortgage & Lending grants mortgages to its clients. Given are the following...
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b) The Bank Smart Mortgage & Lending grants mortgages to its clients. Given are the following parameters about a portfolio of 1'000 identical mortgages. Mortgage amount Probability of default Recovery rate Operating cost Required equity Target ROE Refinancing rate CHF 1'000'000 (for each mortgage) 2% (for each mortgage) 85% (for each mortgage) 0.2% p.a. (for each mortgage) CHF 50'000 (for each mortgage) 15% (for the mortgage portfolio) 0.50% (for each mortgage) What is the minimum interest rate for each mortgage so that the portfolio reaches break- even financially (accounting view) and economically shareholder view)? (3 points) b) The Bank Smart Mortgage & Lending grants mortgages to its clients. Given are the following parameters about a portfolio of 1'000 identical mortgages. Mortgage amount Probability of default Recovery rate Operating cost Required equity Target ROE Refinancing rate CHF 1'000'000 (for each mortgage) 2% (for each mortgage) 85% (for each mortgage) 0.2% p.a. (for each mortgage) CHF 50'000 (for each mortgage) 15% (for the mortgage portfolio) 0.50% (for each mortgage) What is the minimum interest rate for each mortgage so that the portfolio reaches break- even financially (accounting view) and economically shareholder view)? (3 points)
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Financial Accounting Theory
ISBN: 9780134166681
8th Edition
Authors: William R. Scott, Patricia O'Brien
Posted Date:
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