Problem:
Suppose two firms want to borrow money from a bank for a period of 10 years. Firm A has excellent credit and can borrow at the prime rate, whereas Firm B's credit standing is prime + 2. The current prime rate is 5.75 percent, the 30-year Treasury bond yield is 4.35 percent, the three-month Treasury bill yield is 3.54 percent, and the 10-year Treasury note yield is 4.24 percent.
Required:
Question: What are the appropriate loan rates for each customer?
a.) 5.75%, 8.45%
b.) None of these
c.) 6.45%, 7.75%
d.) 6.45%, 8.45%
Note: Explain all steps comprehensively.