A bank has decided to extend a $1 million loan to a commercial client.The bank has a listed prime rate of 7%.The bank has estimated that the marginal cost of raising funds is 4.75%, and their non-funds operating cost is 0.25%.The bank desires a profit margin of 2% on their loans.The bank wants a default risk premium on the loan of 1.5%.They have also estimated that the loan's term risk premium is .5%.What is the interest rate this bank will charge on this loan if they use theprice leadership model?

A.11%B.9%C.9.25%D.None of the other responses are correctE.7%