Suppose a credit market with a good borrowers and 1-a bad borrowers. The good borrowers are...
Suppose a credit market with a good borrowers and 1-a bad borrowers. The good borrowers are all identical, and always repay their loans. Bad borrowers never repay their loans. Banks issue deposits that pay a real interest rate r1, and make loans to borrowers. Banks cannot tell the difference between a good borrower and a bad one. Each borrower has collateral, which is an asset that is worth a units of future consumption goods in the future period. (a) determine the interest rate on loans made by banks. (b) how will the interest rate change if each borrower has more collateral? (c) explain your results, and discuss.
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Suppose a credit market with a good borrowers and 1-a bad
borrowers. The good borrowers are...
Problem 1.Consider a consumer who lives for two periods. His income in period 1 equals 2000...
Problem 1.Consider a consumer who lives for two periods. His income in period 1 equals 2000 EUR and his income in period 2 equals 2500, Real interest rate equals 10% a) Use the appropriate diagram to show the consumer's intertemporal budget constraint and his consumption choice, assuming that he is a net lender in period 1 b) How will his consumption decision be affected if the interest rate increases to 20% Answr using the graph from part (a)? Will he...
Assignment : Imagine that a friend who knows you are working toward your degree in business...
Assignment : Imagine that a friend who knows you are working toward your degree in business administration is complaining about interest rates. Perhaps they think the rate they are getting on savings vehicles, like money markets, is too low, or the interest they are paying on their mortgage is too high. They conclude that it seems like no matter what they lose. 1) Respond to your friend's concerns. Be sure to be specific in supporting the points you are making...
1. Why are rates on credit card loans generally higher than rates on car loans? 2....
1. Why are rates on credit card loans generally higher than rates on car loans? 2. Metrobank offers one-year loans with a 6.5 percent stated or base rate, charges a 0.35 percent loan origination fee, imposes an 18 percent compensating balance requirement, and must pay an 12 percent reserve requirement to the Federal Reserve. The loans typically are repaid at maturity. a) If the risk premium for a given customer is 2.25 percent, what is the simple promised interest return...
Question 1 0 / 1 point A mortgage given by a bank is ___________ to the...
Question 1 0 / 1 point A mortgage given by a bank is ___________ to the bank and ___________ to the borrower. Question options: an asset; a liability an asset; an asset a liability; an asset Question 3 0 / 1 point The cost of borrowing overnight from other banks is: Question options: the yield to maturity. the federal funds rate. the bank rate. Question 4 0 / 1 point A bank has borrowed $250 and has received $500 worth...
1.)To which of the following does the Fed, as used in the United States, refer? A.The...
1.)To which of the following does the Fed, as used in the United States, refer? A.The country’s central bank B.The federal government C.The Treasury Department D.The Federal Deposit Insurance Corporation 2.)If a bank’s assets and its liabilities are equal, the bank is said to be _______. A.maximizing its profit B.insolvent C.fully utilizing its resources D.in balance 3.)The possibility that borrowers will not be able to repay their loans on time or in full is known as ________ risk. A.liquidity B.credit...
True/False (1 Point each) 1) When bond prices decrease, their yields to maturity increase. 2) The...
True/False (1 Point each) 1) When bond prices decrease, their yields to maturity increase. 2) The best forms of money and financial systems enjoy the benefits of trust, belief, and stability. 3) A fundamental function of a commercial bank is to take in deposits and make loans. 4) Traditional banks operate with low margins and high leverage. 5) Rates on bonds issued by a government can be negative. 6) ) The default risk premium is the same as the credit...
can someone check my answers and tell me number 7. Thank you 1. The amount of security of collateral on a loan and t...
can someone check my answers and tell me number 7. Thank
you
1. The amount of security of collateral on a loan and the risk premium on a loan normally are negatively related. True 2. The LTV of an underwater mortgage is less than one. False 3. Payments on a revolving loan replenishes the amount available for future drawdowns. True 4. The difficulty with Altman's Linear Discriminant Model is the attempts to convert quantitative variables to qualitative variables. False 5....
12:037 final exam.pdf d wary of future downturns, and shift the supply curve for kanable funds...
12:037 final exam.pdf d wary of future downturns, and shift the supply curve for kanable funds to the left 23. Since the future holds more uncertainty over longer periods of time, lenders generally want a higher interest rate for loans over a longer period ba lower interest rate for loans over a longer period a higher interest rate for loans over a shorter period d. None of these is true 24. When a borrower fails to pay back a lon...
tr8-Review Questions Chap 9- Review ques 17. Congress passed the Credit Card Accountability and Responsibility, and...
tr8-Review Questions Chap 9- Review ques 17. Congress passed the Credit Card Accountability and Responsibility, and Disclosure Act in order to: A) ame: strict the fees imposed on credit card users. redit card users to reduce the use of their credit cards. B) C) require the sto provide credit cards to students and other customers with a low income. D) prevent banks from imposing a fee when transferring a balance from another credit card. 18. If a bank has $50...
please answer 16,18 and 20 no pictures answers borrowers? Explain Calculating Future Val assuming an interes...
please answer 16,18 and 20
no pictures answers
borrowers? Explain Calculating Future Val assuming an interes Calculating Fu compounded daily on What is the an uninformed beport to potential The bank uses daily compound u is the bank required by law to report to potential Explain why this rate is misleading to an uninformed borrower Future Values (LOI) What is the future value of 53.100 in 17 years interest rate of 8.4 percent compounded semiannually? Future Values (L01 Spartan Credit...
Problem 1.Consider a consumer who lives for two periods. His income in period 1 equals 2000 EUR and his income in period 2 equals 2500, Real interest rate equals 10% a) Use the appropriate diagram to show the consumer's intertemporal budget constraint and his consumption choice, assuming that he is a net lender in period 1 b) How will his consumption decision be affected if the interest rate increases to 20% Answr using the graph from part (a)? Will he...
Assignment : Imagine that a friend who knows you are working toward your degree in business administration is complaining about interest rates. Perhaps they think the rate they are getting on savings vehicles, like money markets, is too low, or the interest they are paying on their mortgage is too high. They conclude that it seems like no matter what they lose. 1) Respond to your friend's concerns. Be sure to be specific in supporting the points you are making...
1. Why are rates on credit card loans generally higher than rates on car loans? 2. Metrobank offers one-year loans with a 6.5 percent stated or base rate, charges a 0.35 percent loan origination fee, imposes an 18 percent compensating balance requirement, and must pay an 12 percent reserve requirement to the Federal Reserve. The loans typically are repaid at maturity. a) If the risk premium for a given customer is 2.25 percent, what is the simple promised interest return...
can someone check my answers and tell me number 7. Thank
you
1. The amount of security of collateral on a loan and the risk premium on a loan normally are negatively related. True 2. The LTV of an underwater mortgage is less than one. False 3. Payments on a revolving loan replenishes the amount available for future drawdowns. True 4. The difficulty with Altman's Linear Discriminant Model is the attempts to convert quantitative variables to qualitative variables. False 5....
12:037 final exam.pdf d wary of future downturns, and shift the supply curve for kanable funds to the left 23. Since the future holds more uncertainty over longer periods of time, lenders generally want a higher interest rate for loans over a longer period ba lower interest rate for loans over a longer period a higher interest rate for loans over a shorter period d. None of these is true 24. When a borrower fails to pay back a lon...
tr8-Review Questions Chap 9- Review ques 17. Congress passed the Credit Card Accountability and Responsibility, and Disclosure Act in order to: A) ame: strict the fees imposed on credit card users. redit card users to reduce the use of their credit cards. B) C) require the sto provide credit cards to students and other customers with a low income. D) prevent banks from imposing a fee when transferring a balance from another credit card. 18. If a bank has $50...
please answer 16,18 and 20
no pictures answers
borrowers? Explain Calculating Future Val assuming an interes Calculating Fu compounded daily on What is the an uninformed beport to potential The bank uses daily compound u is the bank required by law to report to potential Explain why this rate is misleading to an uninformed borrower Future Values (LOI) What is the future value of 53.100 in 17 years interest rate of 8.4 percent compounded semiannually? Future Values (L01 Spartan Credit...
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