Question
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 banks pure rate of interest is 2.5% and the inflation premium is 3%. What rate would the bank offer a customer who is in the lower medium grade risk class?
| A. | 9.26% | |
| B. | 6.64% | |
| C. | 8.74% | |
| D. | 9.79% | |
| E. | 7.16% | |
| F. | 7.69% | |
| G. | 10.31% | |
| H. | 8.21% |
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Accounting Principles
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
9th Edition
978-0470317549, 9780470387085, 047031754X, 470387084, 978-0470533475
