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Suppose two firms want to borrow money from a bank for a period of 10 years. Firm A has excellent credit and can borrow at
Suppose two firms want to borrow money from a bank for a period of 10 years. Firm A has excellent credit and can borrow at the prime rate, whereas Firm B's credit standing is prime rate plus 2%. The current prime rate is 3.75%, the 30-year Treasury bond yield is 3.54%, the three-month Treasury bill yield is 0.54%, and the 10-year Treasury note yield is 2.24%. What are the appropriate loan rates for both the firms? 5.45% for Firm A, 7.45% for Firm B 0 3.75% for Firm A, 5.75% for Firm B 6.75% for Firm A, 8.75% for Firm B o 2.24% for Firm A, 4.24% for Firm B
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