Talk:Syndicated loan

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This is an assertion without evidence: "If the banks cost of funds is a hypothetical 5 %, it needs to charge more than 10 % interest on the loan to make a profit."

Perhaps it should say "If the banks cost of funds is a hypothetical 5 %, it may feel that it needs to charge more than 10 % interest on the loan to make a profit." (Which is more acceptable to state without support.)

Or "If the banks cost of funds is a hypothetical 5 %, it needs to charge more than 5 % interest on the loan to make a profit." (Which is self evident.)

Isn't the point of that example dependent on the idea that 5% of the loans aren't repaid? In which case your expected return is .95*(1+r)-(1+.05) (i.e., 1.05*X goes out the door and (1+r)*.95*X comes back, so your profit is the difference) and solving for r=1.05/.95-1 yields a breakeven of just over 10%. It's obviously an oversimplified example, but the point of syndication is to spread around the risk of not getting paid back, not jsut make a profit. Your example would apply to any loan. Afelton 20:42, 18 October 2006 (UTC)