A bank plans to make a loan of 5 million yuan to an enterprise in the steel industry, with an expected initial fee of 1.5 percent and a service fee of 50 basis points, for eight years and 7.5 years. The bank's cost of capital (and the RAROC benchmark) is 10 percent. Assume, based on two years of historical data, that the bank estimates a risk premium of about 4.2 per cent for the steel sector and that the prevailing market rate for loans to the sector is 12 per cent.

(1). Use the RAROC model to estimate whether the bank should make the loan or not.

(2) For the loan to be approved, how long should the loan be valid?

 (3) Assuming that the life of the loan cannot be changed, what is the service fee charged for the loan to be accepted? 

(4) Assuming the service fee and validity of the loan remain constant, what is the interest rate for the loan to be accepted?