Lecture 18 - Loan Profitability Analysis & Non-interest Rate Loan Features

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Print the following notes and bring to class.  We will learn to calculate the average profit on a loan and decompose the profit into three segments, (1) maturity premium, (2) asset or lending spread, and (3) deposit or liability spread.  EXAM:  These calculations will be on the exam.

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We will also return to finish the non-interest rate loan features at the end of the previous notes (see link below). 

EXAM:  Understand non-interest rate risk/return control procedures and their effects.

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If there is time we will review the latest Senior Loan Officer Opinion Survey on Bank Lending Practices at Selected Large Banks in the U.S. with respect to loan terms for commercial and other types of loans.  DO NOT PRINT IT.  Surveys may be found at http://www.federalreserve.gov/boarddocs/SnLoanSurvey/.

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