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The Bank of Loans uses the following rating scheme to classify the riskiness of its customers. Risk Class Risk Premium (%) Prime .05 High grade
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 4.5% and the inflation premium is 3%. What rate would the bank offer a customer who is in the lower medium grade risk class? A. 7.69% B. 8.74% C. 10.31% D. 9.26% E. 9.79% F. 6.64% G. 8.21% H. 7.16% 0
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