Consider the following problem with asymmetric information in the credit market. Suppose that the lending interest rate (r1) is 5%, and 30% of all the borrowers wilI NOT repay the loan. Taking the...


Consider the following problem with asymmetric information in the credit market. Suppose<br>that the lending interest rate (r1) is 5%, and 30% of all the borrowers wilI NOT repay the<br>loan. Taking the default risk into account, what is the borrowing interest rate (r2)?<br>A. 250%<br>В. 5%<br>С. 50%<br>D. 150%<br>E. None of the above<br>

Extracted text: Consider the following problem with asymmetric information in the credit market. Suppose that the lending interest rate (r1) is 5%, and 30% of all the borrowers wilI NOT repay the loan. Taking the default risk into account, what is the borrowing interest rate (r2)? A. 250% В. 5% С. 50% D. 150% E. None of the above

Jun 11, 2022
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