Confidence Bank has made a loan to Risky Corporation. The loan terms include a default risk-free borrowing rate of 8 percent, a risk premium of 3 percent, an origination fee of 0.1875 percent, and a 9 percent compensating balance requirement. Required reserves at the Fed are 6 percent. What is the expected or promised gross return on the loan?
a. 11.19 percent.
b. 11.90 percent.
c. 12.29 percent.
d. 12.02 percent.
e. 12.22 percent.
Can you give me a process?