Many loans, both personal and business, are based on the prime rate or the Eurodollar deposit rate. It is important for bankers to know what the rates are as these will affect the pricing of loan services. To explore these concepts, answer the following questions:
What market interest rates are most widely used as base rates to price commercial loans?
On the Federal Reserve Board's Web site, the Data Releases section shows weekly releases of selected interest rates. What was the one-month Eurodollar deposit (London rate) for the week of May 19, 2003? What was the prime rate for the week of May 19, 2003?
Compare those rates to May 16, 2007. What changes have occurred during this time?
Discuss how these economic changes may have impacted the pricing of loan services during that time period.