Question
Question 13 The Bank of Loans uses the following rating scheme to classify the riskiness of its customers. Risk Class Risk Premium (%) Prime .05
Question 13
- The Bank of Loans uses the following rating scheme to classify the riskiness of its customers.
Risk Class Risk Premium (%)
Prime .05
High grade 1.0
Upper medium grade 1.5
Lower medium grade 2.0
Speculative: Non-investment grade 4.0
Speculative: Highly 6.0
Substantial risks 9.0
Extremely speculative 12.0
The bank's pure rate of interest is 4.0% and the inflation premium is 3%.
What rate would the bank offer a customer who is in the upper medium grade risk class?
- A. 7.68%
- B. 6.11%
- C. 7.16%
- D. 6.64%
- E. 8.20%
- F. 8.73%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
The Changing Geography Of Banking And Finance
Authors: Pietro Alessandrini ,Michele Fratianni ,Alberto Zazzaro
1st Edition
1441947205, 978-1441947208
