1.Linda Lender at Farmers State Bank is currently determining the loan price for a $200,000 operating loan to Julie and Bill Wallstreet. Linda has compiled the following items as of March 31, 1995:

Cost of all debt and equity funds currently in balance sheet 4.7%

Cost to acquire debt and equity funds in the market5.1%

Administrative cost2.2%

Risks cost1.5%

Non-loan cost0.5%

Competitor cost0.1%

What interest rate should Linda charge to Julie and Bill using average cost pricing?

a.8.7%

b.9.0%

c.9.05%

d.9.75%

What interest rate should Linda charge to Julie and Bill using the marginal cost pricing?

a.8.7%

b.9.05%

c.9.35%

d.9.4%