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 ...

Pure rate theory during which theres good competition and no ri ...

The Bank of Loans uses the following rating scheme to classify the riskiness of its customers. Risk

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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 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 4.0% and the inflation premium is 3%.

What rate would the bank offer a customer who is in the upper medium grade risk class?
A.
8.20%
B.
7.16%
C.
6.11%
D.
7.68%
E.
6.64%
F.
8.73%

Related Book For answer-question

Introduction to Operations and Supply Chain Management

ISBN: 978-0132747325

3rd edition

Authors: Cecil B. Bozarth, Robert B. Handfield

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Posted Date: Sep 28, 2020 04:22 PM

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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

	A.	8.20%
	B.	7.16%
	C.	6.11%
	D.	7.68%
	E.	6.64%
	F.	8.73%

The Bank of Loans uses the following rating scheme to classify the riskiness of its customers. Risk

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Introduction to Operations and Supply Chain Management

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