3. Read the quote below. Then answer the following questions. [Beginning of Quote] Europeans Are Paid to Borrow but Get a Bill for Trying to Save. By DANNY HAKIM and PETER EAVIS. NYT, link. HVIDOVRE, Denmark-At first, Eva Christiansen barely noticed the number. Her bank called to say that Ms. Christiansen, a 36-year-old entrepreneur here, had been approved for a small-business loan. She whooped. She danced. A friend took pictures. "I think I was so happy I got the loan, I didn't hear everything he said," she recalled. And then she was told again about her interest rate. It was -0.0172 percent per year-less than zero. While there would be fees to pay, the bank would also pay interest to her. It was just a little over $1 a month, but still. [End of Quote] (a) How large was the loan that was approved? 1 (b) Given the information provided, can you conclude that overall the interest rate at which Ms. Christiansen is borrowing is negative? Is there a pure arbitrage opportunity one could exploit to make unbounded profits?
3. Read the quote below. Then answer the following questions. [Beginning of Quote] Europeans Are Paid to Borrow but Get a Bill for Trying to Save. By DANNY HAKIM and PETER EAVIS. NYT, link. HVIDOVRE, Denmark-At first, Eva Christiansen barely noticed the number. Her bank called to say that Ms. Christiansen, a 36-year-old entrepreneur here, had been approved for a small-business loan. She whooped. She danced. A friend took pictures. "I think I was so happy I got the loan, I didn't hear everything he said," she recalled. And then she was told again about her interest rate. It was -0.0172 percent per year-less than zero. While there would be fees to pay, the bank would also pay interest to her. It was just a little over $1 a month, but still. [End of Quote] (a) How large was the loan that was approved? 1 (b) Given the information provided, can you conclude that overall the interest rate at which Ms. Christiansen is borrowing is negative? Is there a pure arbitrage opportunity one could exploit to make unbounded profits?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![3. Read the quote below. Then answer the following questions.
[Beginning of Quote] Europeans Are Paid to Borrow but Get a Bill for Trying to
Save. By DANNY HAKIM and PETER EAVIS. NYT, link.
HVIDOVRE, Denmark-At first, Eva Christiansen barely noticed the number. Her
bank called to say that Ms. Christiansen, a 36-year-old entrepreneur here, had been
approved for a small-business loan. She whooped. She danced. A friend took
pictures. "I think I was so happy I got the loan, I didn't hear everything he said,"
she recalled. And then she was told again about her interest rate. It was -0.0172
percent per year-less than zero. While there would be fees to pay, the bank would
also pay interest to her. It was just a little over $1 a month, but still. [End of Quote]
(a) How large was the loan that was approved?
1
(b) Given the information provided, can you conclude that overall the interest rate
at which Ms. Christiansen is borrowing is negative? Is there a pure arbitrage
opportunity one could exploit to make unbounded profits?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0486edcc-e63b-40ca-93cb-461dd58968a5%2F8d6bf3f5-d12d-4109-906e-087f7e16e7ca%2Fwoiyrqs.jpeg&w=3840&q=75)
Transcribed Image Text:3. Read the quote below. Then answer the following questions.
[Beginning of Quote] Europeans Are Paid to Borrow but Get a Bill for Trying to
Save. By DANNY HAKIM and PETER EAVIS. NYT, link.
HVIDOVRE, Denmark-At first, Eva Christiansen barely noticed the number. Her
bank called to say that Ms. Christiansen, a 36-year-old entrepreneur here, had been
approved for a small-business loan. She whooped. She danced. A friend took
pictures. "I think I was so happy I got the loan, I didn't hear everything he said,"
she recalled. And then she was told again about her interest rate. It was -0.0172
percent per year-less than zero. While there would be fees to pay, the bank would
also pay interest to her. It was just a little over $1 a month, but still. [End of Quote]
(a) How large was the loan that was approved?
1
(b) Given the information provided, can you conclude that overall the interest rate
at which Ms. Christiansen is borrowing is negative? Is there a pure arbitrage
opportunity one could exploit to make unbounded profits?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education