Answer: 4.5%, and this represents a required rate of return.

**Explanation:** 1. **Numerical Calculation:** - Savings account rate = 3% - Additional premium required for 2-year CD = 1.5% - Minimum yield required = 3% + 1.5% = **4.5%** 2. **Conceptual Understanding:** - The question describes the minimum amount required to induce investors to lend funds to the bank. - This is best described as a **required rate of return** - the minimum return investors demand for providing capital given the time commitment and risk. - A discount rate is typically used to calculate present values, not to describe investor return requirements. 3. **Why not Option C:** - While 4.5% is numerically correct, it represents a required rate of return, not a discount rate. - A discount rate is used to discount future cash flows to present value, whereas a required rate of return is what investors demand to invest. 4. **Why not Option B:** - 4.0% would be incorrect as it uses the 1-year premium (1.0%) instead of the 2-year premium (1.5%). - The question specifically asks about 2-year CDs, so the 1.5% premium applies. **Key Concept:** Required rate of return represents the minimum return investors require to invest in a particular security, considering factors like time horizon, risk, and opportunity cost.

Author: LeetQuiz Editorial Team