The following is information on current spot and forward term structures (assume the corporate debt pays interest annually) :

-The duration of a soon to be approved loan of $10 million is four years.The 99^th percentile increase in risk premium for bonds belonging to the same risk category of the loan has been estimated to be 5.5 percent. What is the estimated risk-adjusted return on capital (RAROC) of this loan.

Question

The following is information on current spot and forward term structures (assume the corporate debt pays interest annually) :

-The duration of a soon to be approved loan of $10 million is four years.The 99^th percentile increase in risk premium for bonds belonging to the same risk category of the loan has been estimated to be 5.5 percent. What is the estimated risk-adjusted return on capital (RAROC) of this loan.

Quizplus · Accepted Answer

The Answer of The following is information on current spot and forward term structures (assume the corporate debt pays interest annually): -The duration of a soon to be approved loan of $10 million is four years.The 99^th percentile increase in risk premium for bonds belonging to the same risk category of the loan has been estimated to be 5.5 percent. What is the estimated risk-adjusted return on capital (RAROC)of this loan.

The Following Is Information on Current Spot and Forward Term