A Swiss sporting goods company borrows in yen in the Eurocredit market at a rate

Question

A Swiss sporting goods company borrows in yen in the Eurocredit market at a rate of 4.91 percent from Bank of America using a three-month rollover loan. Bank of America assigns a default risk premium of 2.14 percent on the loan, and the country risk is an additional 0.80 percent. The bank can borrow funds in the Euromarket at the three-month LIBOR rate of 0.32 percent. What is Bank of America’s gross profit margin on this loan? (Round answer to 1 decimal places, e.g. 15.2.) Gross profit margin= ___________ %

Explanation / Answer

Interest charged by Bank of America on Loan = 4.91%

Default risk premium = 2.14%

Country risk premium = 0.80%

Net Base interest rate = 4.91 – 2.14 – 0.80 = 2.69%

Gross margin of Bank of America = 2.69%

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.