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9. Five weeks ago, Robin Corporation borrowed from the commercial finance compan that employs you as a loan officer. At that time, the decision was
9. Five weeks ago, Robin Corporation borrowed from the commercial finance compan that employs you as a loan officer. At that time, the decision was made (at your per: sonal urging) to base the loan rate on below-prime market pricing, using the avernge weekly Federal funds interest rate as the money market borrowing cost. The lann was quoted to Robin at the Federal funds rate plus a three-eighths percentage poi markup for risk and profit. Today, this five-week loan is due, and Robin is asking for renewal at money ma ket borrowing cost plus one-fourth of a point. You must assess whether the finance company did as well on this account using the Federal funds rate as the index 0 borrowing cost as it would have done by quoting Robin the prevailing CD rate, the commercial paper rate, the Eurodollar deposit rate, or possibly the prevailing rate U.S. Treasury bills plus a small margin for risk and profitability. To assess what w have happened (and might happen over the next five weeks if the loan is renewed a small margin over any of the money market rates listed above), you have assen these data from the Federal Reserve Statistical Release H15. What conclusion do you draw from studying the behavior of these comm money market base rates for business loans? Should the Robin loan be renewed requested, or should the lender press for a different loan pricing arrangement? Please explain your reasoning. If you conclude that a change is needed, how would you explain the necessity for this change to the customer
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