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A customer wants to borrow from bank one year from now. To compensate for costs of making the loan, the bank needs to charge on

A customer wants to borrow from bank one year from now. To compensate for costs of making the loan, the bank needs to charge on percentage point more than the expected interest rate on a Treasury bond with the same maturity if it is to make profit. If the one-year Treasury bond rate is 6% and the two-year bond rate is 7.5%. What is the minimum interest should the manager be willing to make the commitment?

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