Question: Use the following information on a one-year loan commitment to calculate the return on the loan commitment. BR = FI's base interest rate on

Use the following information on a one-year loan commitment to calculate the

Use the following information on a one-year loan commitment to calculate the return on the loan commitment. BR = FI's base interest rate on the loans = 8% Risk premium on loan commitment = 2.5% f = Upfront fee on the whole commitment = 25 basis points f = Back-end fee on the average unused portion of the commitment = 50 basis points b = Compensating balance on loans = 10% RR = Reserve requirements = 8% td=Expected (average) takedown rate on the loan commitment = 70%

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