The CEO wants your CRO opinion on the attractiveness of a large loan opportunity with a healthcare company benefiting from the current vaccination business. ?

The bank's threshold cost of capital is 10%. ?

he loan proposal is for an outstanding amount of $1,500m. Pricing is estimated at 1.20%, net of funding costs?The RWA risk-weight is assumed to be 65% of the exposure amount and the credit expected loss 1%. You may consider operating costs, tax charges, and any other elements to be immaterial.?

 

(a) Compute the RAROC of the deal and conclude whether it is accretive.?

Answer rating: 100% (QA)

RAROC Revenues Costs Expected Losses Economic capital RAROC 120 1500000000 0 1... View the full answer