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The Bank of Loans uses the following rating scheme to classify the riskiness of its customers. Risk Class Prime High grade Upper medium grade Lower

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The Bank of Loans uses the following rating scheme to classify the riskiness of its customers. Risk Class Prime High grade Upper medium grade Lower medium grade Speculative: Non-investment grade Speculative: Highly | Substantial risks | Extremely speculative Risk Premium (%) 1.05 10 1.5 120 60 19.0 12.0 The bank's pure rate of interest is 1.5% and the inflation premium is 3% What rate would the bank offer a customer who is in the upper medium grade risk class

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