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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