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Business, 19.03.2021 01:00 zazy15

Consider a loan portfolio of $100 million principal which pays an annual rate of 9%. The economic capital against such a loan is estimated to be $6 million (i. e. 6% of the loan). The capital can be invested in government securities returning 2% per annum. The $100 million should be raised by deposits with an interest rate of 6%. The bank has an operating cost of $1 million per annum. The expected loss on this portfolio is assumed to be 0.75% per annum. Please calculate the RAROC for this loan portfolio.

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Consider a loan portfolio of $100 million principal which pays an annual rate of 9%. The economic ca...
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