Bozo Bank makes a loan to Rizzo Razors. It has a base lending rate on loans of 11% and charges a risk premium of 3% on the loan. It does not charge an origination fee, but imposes compensating...

Bozo Bank makes a loan to Rizzo Razors. It has a base lending rate on loans of 11% and charges a risk premium of 3% on the loan. It does not charge an origination fee, but imposes compensating balances of 10%.

Reserve Requirements are 10%, and they do not pay interest.

a. What would be the approximate cost of the loan to Rizzo Razors?

b. What would be the return to the bank?