A bank charges one borrower (A) 8 percent interest per year and another borrower (B) 10 percent interest per year. Which of the following is a plausible reason for the higher interest rate for B? B has a better credit rating than A. A is borrowing a larger amount than B. B is using the money for a less risky project than A A is borrowing the money for a longer period than B.

A bank charges one borrower (A) 8 percent interest per year and another borrower (B) 10 percent interest per year. Which of the following is a plausible reason for the higher interest rate for B? B has a better credit rating than A. A is borrowing a larger amount than B. B is using the money for a less risky project than A A is borrowing the money for a longer period than B.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Investment X offers to pay you $5,500 per year for nine years, whereas Investment Y offers to pay…

A: An investment is an asset or item acquired with the goal of generating income or appreciation.…

Q: Suppose a bond pays annual interest of $50. Compute the interest rate per year that a bondholder can…

A: Detailed explanation:Given that the annual interest paid is $50, and the face values are $200, $500,…

Q: Dr. Rubin has $10,000 to invest for three years. Two banks offer a 2 percent interest rate, but bank…

A: Given: Amount=$10000 Interest rate=2%

Q: What type of bond is issued by state and local governments? Is there any risk that state and local…

A: An investor issues a bond to a borrower, such as a company or the government.The funds are used to…

Q: If a lender faces a potential loan applicant pool made up of equal amounts of low risks and high…

A: There is a single type of lender and two types of borrowers in a loan market. The first type of…

Q: How does an increase in government borrowing affect the equilibrium interest rate in the market for…

A: The loanable funds market is a theoretical framework used to understand the dynamics of borrowing…

Q: Compare credit, savings, and investment services available to the consumer from financial…

A: Financial institutions, which include lenders, financial agencies, insurers, and securities dealers,…

Q: Please don't give photo answer give proper explanation answer and take a like

A: a. Certain Returns:Project A: Gross Return = Revenue - Cost = 115,000 pesos - 100,000 pesos = 15,000…

Q: The decrease in savings causes the decrease in supply of loanable funds. Select one: True False

A: The main source of loanable assets is saving. Families set aside cash, these investment funds are…

Q: 12. Which of the following is most likely to cause an increase in demand for loanable funds? (A)…

A: The demand for loanable funds reflects how borrowers in an economy act and the quantity of loans…

Q: A company calls to notify you that the interest rate on your credit card will increase from 19% to…

A: There is a difference between percentage points and percent change. The percentage points is the…

Q: Which of the following is NOT a retirement plan? a) 401k plan b) 529 plan c) IRA plan d) 501(c)…

A: Retirement planning is the process of securing life after retirement when the person will be unable…

Q: Why it is not ideal to invest according to what the board lot is telling you? 2. What should be the…

A: A board lot is the basic trading unit for round lots determined by a stock exchange. The objective…

Q: Draw the yield curve for u.s. government bonds as it was on february 5th 2020

A: Data for the calculation was taken from country U department of treasury official site, So the yield…

Q: Why is the supply of loanable funds upsloping? Why is the demand for loanable funds downsloping?…

A: Loanable funds refer to the set of all forms of credit available in the market including loans,…

Q: Which of the following is a benefit of using financial investment to raise financial capital? there…

A: In a market, when a firm wants to raise funds or capital to make investment in the business, it has…

Q: The table below shows Demand and Supply for loanable fund at given time. Real interest rate…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: A well-functioning financial system does all of these EXCEPT: a. foster economic growth by…

A: The objective of the financial system is to manage the availability of funds in the market. This not…

Q: What must have happened in the loanable funds market to produce the 2020 level of interest rates…

A: Demand curve for the loanable fund shows the level of demand for loan at different interest rate.…

Q: Which of the following would be considered as example of indirect finance? A. Abita borrowed $10,000…

A: The indirect financing is financing where borrowers borrow money not directly from investors but…

Q: Higher interest rates are likely to Group of answer choices decrease consumer spending and increase…

A: Consumers use their income for both spending and saving. Consumption is the portion of revenue used…

Question

A bank charges one borrower (A) 8 percent interest per year and another borrower (B) 10 percent interest per year. Which of the
following is a plausible reason for the higher interest rate for B?
B has a better credit rating than A
A is borrowing a larger amount than B.
B is using the money for a less risky project than A
A is borrowing the money for a longer period than B

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!

SEE SOLUTION Check out a sample Q&A here

Step 1: Define borrower

VIEW

Step 2: Determine the correct option

VIEW

Step 3: Explain why other options are incorrect

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

What group of people benefits from a higher interest rate? Explain how they benefit.
What happens to the market for loanable funds when interest rates increase? Planned investments increase. Planned investments is not effected There is a decrease in demand for loanable funds. There is a decrease in quantity demanded for loanable funds.
Which of the following student loans DO NOT qualify for student loan forgiveness? A.Direct Unsubsidized B. Direct Subsidized C.loan D. Private loan don't need explanation just the answer
A mortgage that requires a down payment of 5% of the purchase price of the house is called a good deal. an "upside-down" loan a subprime loan a prime loan
If the interest rates increase this will _____ the quantity of loanable funds demanded, and if the interest rates decrease this will______it. Select one: a. increase; reduce b. increase; increase c. reduce; increase Od. reduce; reduce
Exercise #1: Write two paragraphs on the impact of borrower liquidity (think, cash like assets and income) vs. equity (think, property value). These issues can be measured at loan origination, and also can and do change over the life of the loan. They are effected by macro-economic factors, like the local or general health of the economy and by personal factors like death, divorce, lost of employment, and over spending/poor financial management.
Manipulate the graph to show what will happen to supply and demand in the market for loanable funds when the government budget deficit increases, changing the equilibrium quantity of loanable funds by 3 percentage points. Ceteris paribus, what is the new interest rate? interest rate: 6 Ceteris paribus, private investment would decrease. not change. increase. % Interest rate (%) 10 9 8 7 6 4 3 2 1 0 0 Supply 6 Demand 2 4 6 8 10 12 14 16 18 20 22 24 26 28 Quantity of loanable funds (% of GDP)