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5. QRS Bank is charging a 12 percent interest rate on a $5,000,000 loan. The bank...

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Finance

5. QRS Bank is charging a 12 percent interest rate on a$5,000,000 loan. The bank also charged $100,000 in fees tooriginate the loan. The bank has a cost of funds of 8 percent. Theborrower has a five percent chance of default, and if defaultoccurs, the bank expects to recover 90 percent of the principal andinterest. What is the risk of the loan using the Moody's Analyticsmodel? Briefly discuss.

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