RAROC = βE × ARAROC + RF

问题如下：

Suppose a bank loan has the following characteristics: Gross revenues are $1.3 million. Interest expense is $0.3 million. The return on the $5 million economic capital invested in T-bills is $100,000. The firm’s beta is 1.5. The unexpected loss for the loan is estimated at $500,000. The adjusted RAROC is equal to 8%. What is the worst-case loss for this loan?

选项：

A.$1.6 million B.$2.3 million C.$0.9 million D.$0.75 million

解释：

First, determine RAROC as follows:

RAROC = βE × ARAROC + RF

The RF is calculated as the return from economic capital, which is $100,000/$5,000,000 = 2%.

RAROC = 1.5 × 0.08 + 0.02

RAROC = 14%

Second, determine the expected loss for the loan as follows:

EL = -(RAROC × EC – revenues + expenses – return on EC)

EL = -(0.14 × $5 - $1.3M + $0.3M - $0.1M) = $400,000

Finally, compute the worst-case loss as the sum of expected and unexpected loss:

Worst-case loss = expected loss + unexpected loss

Worst-case loss = $400,000 + $500,000

Worst-case loss = $0.9M