What two components make up the overall interest rate charged on the client's loan?

The overall interest rate charged on a client's loan is primarily composed of the cost of funds and the spread. The "cost of funds" refers to the interest rate that lenders pay to secure the capital they lend out, which can include the rates paid on deposits or other funding sources. The "spread" represents the lender's margin over the cost of funds, which is essentially the profit the lender seeks to make on the loan.

By combining the cost of funds with the spread, lenders can determine the interest rate they will charge borrowers. This arrangement allows lenders to cover their operational costs and risks while ensuring profitability. Understanding this relationship is essential for assessing how lenders price their loans and manage their portfolios.

The other options include components that, while relevant in certain contexts, do not accurately capture the primary elements that constitute the overall interest rate for loans. For instance, fees and operational expenses may influence overall lending profitability but do not directly factor into the calculation of interest rates in the same straightforward manner as the cost of funds and the spread do.