Suppose Two Firms Want to Borrow Money from a Bank

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 rate plus 2 percent. 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. What are the appropriate loan rates for both the firms?

A) 6.45% for Firm A, 7.75% for Firm B
B) 6.45% for Firm A, 8.45% for Firm B
C) 5.75% for Firm A, 8.45% for Firm B
D) None of the above