What is the FI's expected return on its loan portfolio?

Question

Quizplus · Accepted Answer

The expected return on the loan portfolio can be calculated using the weighted average of the expected returns on each category of loans.

Weighted average return = (Weight of category 1 x Expected return of category 1) + (Weight of category 2 x Expected return of category 2) + (Weight of category 3 x Expected return of category 3)

= (0.35 x 18.00%) + (0.40 x 14.00%) + (0.25 x 12.00%)

= 6.30% + 5.60% + 3.00%

= 14.90%

Therefore, the closest answer is D) 14.67 percent.

What Is the FI's Expected Return on Its Loan Portfolio