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lectur4-page18 - new vehicles was around 4.52 We simply...

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We can estimate the risk premium charged by a bank for a three year automobile loan on a new vehicle by comparing the U.S. Treasury Note rate for 3 year notes to the rate charged on auto loans by the bank. In August of 1993, the risk premium being charged by Nations Bank (Bank of America today) on 3 year auto loans for
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Unformatted text preview: new vehicles was around 4.52%. We simply took the difference between the treasury bill rate, and the auto loan rate to determine the risk premium. In August of 1993, the risk premium was relatively high. The economy was recovering from the recession of 1991, and bankruptcy fillings were at record levels. 18...
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