The risk-adjusted return on capital (RAROC) model calculates the actual or promised annual cash flow on...
The risk-adjusted return on capital (RAROC) model calculates the actual or promised annual cash flow on a loan as a percentage of the amount lent. True or False?
Homework Answers
Answer: False
RAROC=(One year income on a loan)/(Loan (asset) risk or value at
risk)
It is a risk based profitability measurement. In this the expected
loan income is balanced against loan expected risk.
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The risk-adjusted return on capital (RAROC) model calculates the
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11
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