Question
Roundabout Bank recently received loan applications from two small manufacturing companies (Majestic Ltd. and Upstart Ltd.) Each company indicated that it wanted to borrow 200,000
Roundabout Bank recently received loan applications from two small manufacturing companies (Majestic Ltd. and Upstart Ltd.) Each company indicated that it wanted to borrow 200,000 from the bank. Majestic Ltd. has been in business for approximately one year. However Upstart Ltd. commenced business only within the last month and is regarded as more risky than Majestic Ltd. Roundabout Bank has decided that it is willing to lend to both companies but at different rates of interest. Which of the following is the most plausible: The bank offers to lend to Majestic Ltd. at EURIBOR minus 0.5%, and offers to lend to Upstart Ltd. at EURIBOR + 3%. The bank offers to lend to Majestic Ltd. at EURIBOR + 3% and offers to lend to Upstart Ltd. at EURIBOR minus 0.5%. The bank offers to lend to Majestic Ltd. at EURIBOR +2% and offers to lend to Upstart Ltd. at EURIBOR + 3%. The bank offers to lend to Majestic Ltd. at EURIBOR +3% and offers to lend to Upstart Ltd. at EURIBOR + 2%,
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