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B01028 - Chapter 6 - Lending To Business Firms and Pricing Business Loans
B01028 - Chapter 6 - Lending To Business Firms and Pricing Business Loans
Chapter 6:
Lending to business firms and
pricing business loans
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Key topics
Types of Loans
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Cash Buy
received ! inventories
Goods on Produce
sales goods
Chapter 6: Lending to business firms and
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pricing business loans
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Bank Dealer
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(3) whether or not the customer conscientiously files periodic financial statements,
(4) whether the customer is willing to agree not to pledge assets to other creditors,
(6) whether the customer is excessively exposed to the risk of changing technology,
(7) the length of time before a proposed project will generate positive cash flow,
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Explanation
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Attention !
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Profitability Indicators
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Some originations….
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Contingent liabilities
(Khoản nợ tiềm ẩn)
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Contingent liabilities
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Environmental liabilities
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Exercise
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Methods….
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Example
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What is LIBOR?
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In which…..
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Exercise 1 (CPA)
• Finch Corporation is a new business client for First Commerce
National Bank and has asked for a one-year, $10 million loan at an
annual interest rate of 6 percent. The company plans to keep a 4.25
percent, $3 million CD with the bank for the loan’s duration. The loan
officer in charge of the case recommends at least a 4 percent annual
before-tax rate of return over all costs. Using customer profitability
analysis (CPA) the loan committee hopes to estimate the following
revenues and expenses which it will project using the amount of the
loan requested as a base for the calculations:
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RELAX
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Quizz
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ANSWER
1. E
2. A
3. D
4. D
5. $560,000
6. $332,500
7. 10.25 percent
8. $2000
9. 50%
10. 1.5
Chapter 6: Lending to business firms and
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pricing business loans
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Cost-plus requires the bank to estimate the total cost involved in making a loan
and then adds to that cost estimate a small margin for profit.
pricing
price leadership A method for setting loan rates that looks to leading
lending institutions to set the base loan rate
below-prime Interest rates on loans set below the prevailing prime
pricing rate, usually based on the level of key money market
interest rates (such as the current market rate on
Federal funds or Eurodollar deposits)
customer A method for evaluating a customer's loan request
profitability that takes into account all revenues and expenses
analysis associated with serving that particular customer and
calculates and expected net return over all costs
incurredChapter
from serving
6: Lending the
to business firmscustomer
and
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pricing business loans
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