The Bank of Fast 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 banks pure rate of interest is 2% and the inflation premium is 3.5%. The bank offers an annual rate of 11.90% to a customer. What is the risk class of this customer? A. Speculative: Non-investment grade

B. Upper medium grade

C. Substantial risks

D. High grade

E. Speculative: Highly

F. Lower medium grade