Short term cash use due to projected cash flow

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Smith Enterprises is looking to obtain a loan for short term cash use due to a projected cash flow problem. The Bank of MA charges an interest rate of 14%. The assessed default risk on a two year loan is 3%, liquidity risk of 2%, maturity risk of 2%. The inflation is expected to be 4% the first year and 6% the second year. What is the implied pure rate of interest?

Reference no: EM131955732

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