ROYAL BANK OF MIDWEST – QUESTIONS In your report use the guide for reports found on the course website and incorporate the answers to questions 1 to 5 below. The available data is in the Excel spreadsheet on the course website. Note that the data is contained in two tabs. Q. 3. Mary believes that the ten percent required down payment will protect the bank from a loss of principal. However, should the loan default, the funds are likely to be tied up, without interest income for six to nine months. The funds could have been used to fund a prime loan at around six percent interest with a default rate of well under one percent. Mary is wondering whether or not the two percent premium paid on the performing loans will cover the expected loss from the nonperforming loans. She expects a potential default rate around 3-5 percent. The average home loan is about $200,000.
