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QUESTION

Chase bank uses the following rating scheme to classify the riskiness of its customers Risk Class Prime .05% High grade 1.0% Upper medium grade 1.5%...

Chase bank uses the following rating scheme to classify the riskiness of its customers

Risk Class

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

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