Question: Q-6 a. What is the expected return on the loan from question 3 if the expected recovery in the event of default is as indicated

Q-6 a. What is the expected return on the loan from

Q-6

a. What is the expected return on the loan from question 3 if the expected recovery in the event of default is as indicated above?

b. What is the expected return on the loan from part a of this question if the expected recovery rate is 10% greater than indicated above?

Q-3. What is the contractually promised return (the contract rate) on the loan?

Note: I need the solution to Q-6 (a) and (b) only

va yuLSLUus v us LI IUU W118 WTULMALIUIL. Base rate Credit risk premium Origination fees Compensating balance Reserve requirement Probability of payment Expected recovery in event of default 5.5% 3% 0.35% 7.5% 10% 98.25% 55%

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