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A bank has determined that the prevailing prime rate is 3.75 percent and that a particular loan has a default risk premium of 1.35 percent.

A bank has determined that the prevailing prime rate is 3.75 percent and that a particular loan has a default risk premium of 1.35 percent. The company wants the loan for 3 years and the bank has determined that term risk premium is 1.45 percent. Using the price leadership model of pricing loans, what should the interest rate be on this loan?

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