Question: Suppose that a bank does the following: a. Sets a loan rate on a prospective loan with BR = 5.66% and = 6.59%. b. Charges

Suppose that a bank does the following:

a. Sets a loan rate on a prospective loan with BR = 5.66% and = 6.59%. b. Charges a 0.11 percent loan origination fee to the borrower. c. Imposes a 12 percent compensating balance requirement to be held as noninterest-bearing demand deposits. d. Holds reserve requirements of 9 percent imposed by the Federal Reserve on the banks demand deposits.

Calculate the banks contractually promised return (or ROA) on this loan.

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