1. If Ahmad can buy a car today for $ 5000, the car will worth $ 10,000 in extra income to Ahmad next year because he will use the car to do his business. Should Ahmad borrow the $ 5000 for the loan shark at 90% interest if no one else could lend this money to Ahmad? Will Ahmad be better or worse off as the result of borrowing the money from the loan shark? Why do loan shark care less about moral hazard when lending money compared to commercial banks? Can you make a case for legalizing loan shark? Note: Your answers should be detailed with proper references.
1. If Ahmad can buy a car today for $ 5000, the car will worth $ 10,000 in extra income to Ahmad next year because he will use the car to do his business. Should Ahmad borrow the $ 5000 for the loan shark at 90% interest if no one else could lend this money to Ahmad? Will Ahmad be better or worse off as the result of borrowing the money from the loan shark? Why do loan shark care less about moral hazard when lending money compared to commercial banks? Can you make a case for legalizing loan shark? Note: Your answers should be detailed with proper references.
Chapter7: Losses—deductions And Limitations
Section: Chapter Questions
Problem 20P: Carlos opens a dry cleaning store during the year. He invests 30,000 of his own money and borrows...
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Transcribed Image Text:1. If Ahmad can buy a car today for $ 5000, the car will
worth $ 10,000 in extra income to Ahmad next year
because he will use the car to do his business. Should
Ahmad borrow the $ 5000 for the loan shark at 90%
interest if no one else could lend this money to Ahmad?
Will Ahmad be better or worse off as the result of
borrowing the money from the loan shark? Why do loan
shark care less about moral hazard when lending money
compared to commercial banks? Can you make a case
for legalizing loan shark? Note: Your answers should
be detailed with proper references.
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