Question 2 a. You are the new Senior Corporate Credit Analyst at Fischer Bank and...
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Question 2 a. You are the new Senior Corporate Credit Analyst at Fischer Bank and you have been asked to assess the following loan for one of its longstanding and valued corporate clients who has contributed significantly to your Bank's profitability for the last thirty (30) years. The firm is in the oil industry and requires fifty (50) million USD. The maximum change in the risk premium for this sector is 2.5% based on seven years of historical data and interest rates for these loans are usually priced at 12.50%. The client has proposed to repay the loan in eight years which based on your calculations would have a duration of 7.1 years. You expect to charge 0.15% of the face value of the loan in fees, and your bank's cost of capital (benchmark return on capital) is 11.50%. Taking all aspects of this situation into consideration write a report on the action you would recommend your boss to take regarding this client. (15 marks) b. Briefly discuss the impact of rapid technological improvements in electronic payment system on crime and fraud risk. (No more than ONE PAGE)
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