Question
The Bank of Fast Loans uses the following rating scheme to classify the riskiness of its customers. Risk ClassRisk Premium (%) Prime.05High grade1.0Upper medium grade1.5Lower
The Bank of Fast Loans uses the following rating scheme to classify the riskiness of its customers.
Risk ClassRisk Premium (%)Prime.05High grade1.0Upper medium grade1.5Lower medium grade2.0Speculative: Non-investment grade4.0Speculative: Highly6.0Substantial risks9.0Extremely speculative12.0
The bank's pure rate of interest is 2% and the inflation premium is 3.5%.
The bank offers an annual rate of 6.63% to a customer. What is the risk class of this customer?
A.Speculative: Non-investment grade
B.Lower medium grade
C.High grade
D.Upper medium grade
E.Substantial risks
F.Speculative: Highly
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International financial management
Authors: Jeff Madura
12th edition
1133947832, 978-1305195011, 978-1133947837
