32. Problem 3. The acme bank and storm door company (good old ("AB&SDC") is trying to determine whatever rate of interest they should pay on the New 6 months CDs they are trying to get customers to buy. Looking at the WSJ here's some interest rates they found: Prime: 5%; LI OR: 3.25%; Fed Funds: 1.5%; 10 Month T-Note: 2.42%; 3 month T-bill 1.45%. Believe it or not, AB&SDC had a rather shaky reputation- so much knowledge investors would require an additional 8% to buy Acme's CDs to make up for their high risk of default (ignore maturity and liquidity issues). Given the above, what nominal rate of interest must Acme's CDs have to pay?

32. Problem 3. The acme bank and storm door company (good old ("AB&SDC") is trying to determine whatever rate of interest they should pay on the New 6 months CDs they are trying to get customers to buy. Looking at the WSJ here's some interest rates they found: Prime: 5%; LI OR: 3.25%; Fed Funds: 1.5%; 10 Month T-Note: 2.42%; 3 month T-bill 1.45%. Believe it or not, AB&SDC had a rather shaky reputation- so much knowledge investors would require an additional 8% to buy Acme's CDs to make up for their high risk of default (ignore maturity and liquidity issues). Given the above, what nominal rate of interest must Acme's CDs have to pay?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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