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Your employer (a bank) has decided to offer two and three-year loans to its small business customers. You have been presented the task of determining what the appropriate minimum interest rates on these loans should be for the most creditworthy customers. The decision to select a particular fixed rate for the loans depends on our forecast of the interest rates and our internal efficiency in managing the loan. This requires compensation for the costs of making the loan plus profit. You are to use the most recent Treasury bond data as the basis for determining the minimum interest rates on the small business fixed-rate loans. Your supervisor indicates that the bank needs to charge two percentage points more than the expected interest rate on treasury bonds for these loans. In addition, you are provided with Treasury bond information from Bondsonline posted on May 21, 2003: Maturity Yield 3-month 1.07 6-month 1.07 1-year 1.13 2-year 1.35 3-year 1.67 4-year 2.04 5-year 2.36 7-year 2.85 10-year 3.39 15-year 3.96 20-year 4.35
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  • Spring '17
  • amiruddin

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Christopher Reinemann
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