Solution-What nominal rate of interest must Acme CDs hav to

What nominal rate of interest must Acme CDs hav to pay

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Reference no: EM132905901

Question - The Acme Bank and Storm Dood Company (good old "AB&SDC") is trying to determine what rate of interest they should pay on the new 6 month CDs they are trying to get customers to buy. Looking at the WSJ here's some interest rates they found:

Prime: 5%; LIBOR: 3.25%; Fed Funds: 1.5%; 10 Month T-Note: 2.42%; 3 Month T-Bill 1.25%.

Believe it or not, AB&SDC has a rather shaky reputation - so much so knowledgeable investors would require an additional 8% to buy Acme's CDs to make up for their high risk of defalut (ignor maturity and liquidity issues).

Given the above, what nominal rate of interest must Acme's CDs hav to pay? Please show all work.

Reference no: EM132905901

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What nominal rate of interest must Acme CDs hav to pay

Reference no: EM132905901

Reference no: EM132905901

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