Bozo Bank makes a loan to Rizzo Razors. It has a base lending rate on loans of 11% and charges a risk premium of 3% on the loan. It does not charge an origination fee, but imposes compensating balances of 10%. Reserve Requirements are 10%, and they do not pay interest. 

a. What would be the approximate cost of the loan to Rizzo Razors? 

b. What would be the return to the bank?

Answer rating: 100% (QA)

a The cost of the loan to Rizzo Razors can be calculated as fo... View the full answer