Mathematics · Cost Volume Profit Analysis
A bank's branch specialized in SME lending is analyzing its performance using CVP techniques. The branch has a total fixed cost of 24,000,000. The average interest rate charged on loans is 12 percent per annum while the average cost of funds is 7 percent per annum. The variable administrative cost for managing the loan portfolio is 1 percent of the loan amount per annum. The branch targets an annual profit of 12,000,000. Calculate the total loan portfolio the branch must maintain to achieve its target profit and the Break-Even loan portfolio.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Total Portfolio: 750,000,000; BEP Portfolio: 500,000,000.
- 2Total Portfolio: 600,000,000; BEP Portfolio: 400,000,000.
- 3Total Portfolio: 1,200,000,000; BEP Portfolio: 800,000,000.
- 4Total Portfolio: 900,000,000; BEP Portfolio: 600,000,000.✓
Correct answer
Total Portfolio: 900,000,000; BEP Portfolio: 600,000,000.
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