Exercise III.1. (10 points) Banks and other lending affiliates within the holding company of A are reporting heavy loan demand this week from companies in the region B that are planning a significant expansion of inventories and facilities before the beginning of the fall season. The holding company plans to raise $3500 million in short-term funds this week, of which about $3250 million will be used to meet these new loan requests. Interbank funds are currently trading at 6.5%, negotiable CDs are trading in the stock market at 7%, and foreign borrowings are available at all maturities under one year at 8%. Noninterest costs are estimated at 1% for interbank, 0.7% for CDs;0.2% for foreign borrowings. Calculate the effective cost rate of each of these sources of funds and make a management decision on what sources to use. Be prepared to defend your decision