A bank has determined that its marginal cost of raising funds is 4.5 percent and that its nonfunds costs to the bank are 0.5 percent.It has also determined that its margin to compensate the bank for default risk for a particular customer is .30 percent.It has also determined that it wants to have a profit margin of .3 percent.What business loan model is this bank using to price the loan for this customer?
A) The cost-plus loan pricing method
B) The price leadership model
C) The below-prime rate pricing model
D) Customer profitability analysis
E) None of the options is correct.
Correct Answer:
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