Mrs. Monroe asks her bank for a personal loan to be contracted for a 1-year period at an interest rate of 9.5% two years from now. The bank usually asks for a 1.8% additional charge above the expected interest rate on Treasury bond of similar bonds. Assume that:

1. The required rate by the bank is equal to: *

a. 8.56%

b. 8.80%

c. 10.36%

d. 10.60%

e. None of the above

2. Would the bank accept Mrs. Monroes request? *

a. No, the bank would not accept Mrs. Monroes request, because the banks required rate is less than the customers offered rate

b. Yes, the bank would accept Mrs. Monroes request, because the banks required rate is less than the customers offered rate

c. No, the bank would not accept Mrs. Monroes request, because the banks required rate is higher than the customers offered rate

d. Yes, the bank would accept Mrs. Monroes request, because the banks required rate is higher than the customers offered rate

e. None of the above

The 1-year bonds rate is 5.9%, The 2-years bond rate is 6.9% with a liquidity premium of 0.025%, The 3-years bond rate is 7.4% with a liquidity premium of 0.055%