Questions
BU.231.710.51.FA25 The Final Exam
Single choice
RAROC (Risk-Adjusted Return on Capital) is calculated as:
Options
A.Expected return Standard deviation of return
B.One-year earnings on loan Expected loss Capital at risk (unexpected loss)
C.Net interest income Total assets
D.Net income Equity capital
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Step-by-Step Analysis
When evaluating the concept of RAROC (Risk-Adjusted Return on Capital), it's essential to identify the components that link risk and return in a capital-adjusted framework.
Option 1: 'Net interest income Total assets' focuses on simple accounting measures and scale, but it does not incorporate risk or capital ......Login to view full explanationLog in for full answers
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