Sun Bank has issued a one-year $75 million loan commitment to a customer for an up-front fee of 25 basis points and at a fixed rate of 8.25 percent. The back-end fee for the unused portion of the commitment is 15 basis points. The bank requires a 12 percent compensating balance in demand deposits. Reserve requirements on demand deposits are 8 percent. What is expected return on the loan to the bank if 25 percent of the loan is drawn? Do not take future values of fee or interest income received.

Question 16 options:

A)

7.45 percent.

B)

8.23 percent.

C)

9.80 percent.

D)

10.90 percent.

E)

None of the above