A bank has estimated its expected (predicted) loan loss rate on its consumer loans at 3.25%. If the bank wishes to earn 8% on it consumer loans, what rate should it charge its customers? 11.34% 11.63% 4.60% 4.35% The following is not an example of a closed-end loan Automobile Loans Home mortgages Recreational vehicle loan Credit Card Core deposits of a commercial bank consist of the following except: Demand deposits Savings deposits Money market deposits Eurodollar deposits
A bank has estimated its expected (predicted) loan loss rate on its consumer loans at 3.25%. If the bank wishes to earn 8% on it consumer loans, what rate should it charge its customers?
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11.34%
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11.63%
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4.60%
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4.35% |
The following is not an example of a closed-end loan
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Automobile Loans |
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Home mortgages
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Recreational vehicle loan
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Credit Card |
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Core deposits of a commercial bank consist of the following except:
Demand deposits
Savings deposits
Money market depositsEurodollar deposits
The formula to determine the required interest charged given the loan loss rate is as below:
Where net return is the % return the bank wishes to earn on its loans.
Loan loss rate is the % of loans that will default and will not be able to pay back.
A closed end loan is a type of loan where the loan is closed by paying an interest and principal payments over a period of time. Closed end loans include mortgages and automobile loans.
Core deposits of a bank are main deposits that a bank receives from customers. They deposits are then disbursed as loans. The customers get interest on their deposits.
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