In a credit market, type B borrowers repay 89% of the time and type C repay 76% of the time. They both want a loan for $200. The bank cannot observe type, but figures the population of borrowers is divided up such that 75% are type B and the rest are type C. In this case, the competitive pooling rate on the loans is? 10.4% 12.4% O 14.4% O 17.0%

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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In a credit market, type B borrowers repay
89% of the time and type C repay 76% of
the time. They both want a loan for
$200. The bank cannot observe type, but
figures the population of borrowers is
divided up such that 75% are type B and
the rest are type C. In this case, the
competitive pooling rate on the loans is?
10.4%
O 12.4%
O 14.4%
O 17.0%
Transcribed Image Text:In a credit market, type B borrowers repay 89% of the time and type C repay 76% of the time. They both want a loan for $200. The bank cannot observe type, but figures the population of borrowers is divided up such that 75% are type B and the rest are type C. In this case, the competitive pooling rate on the loans is? 10.4% O 12.4% O 14.4% O 17.0%
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