Explain how a default premium can arise, and what would cause it to increase. A default premium comes about to compensate for when payback their loans. The default premium would increase if the fraction of borrowers do not lenders do not lenders do borrowers do in the population decreases.

Explain how a default premium can arise, and what would cause it to increase. A default premium comes about to compensate for when payback their loans. The default premium would increase if the fraction of borrowers do not lenders do not lenders do borrowers do in the population decreases.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

first blank options are (Borrowers, lenders) and third blank options are (Bad borrowers, good borrowers)

Explain how default premium can arise, and what would cause it to increase.
A default premium comes about to compensate
▼for when
payback their loans. The default premium would increase if the fraction of
borrowers do not
lenders do not
lenders do
borrowers do
in the population decreases.

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