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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Imagine that you are in the position of buying loans in the secondary market (that is, buying the right to collect the payments on loans) for a bank or other financial services company. Explain why you would be willing to pay more or less for a given loan If:

a. The borrower has been late on a number of loan payments

b. Interest rates In the economy as a whole have risen since the bank made the loan

c. The borrower Is a firm that has just declared a high level of profits

d. Interest rates in the economy as a whole have fallen since the bank made the loan

a)

To determine

The reason behind for paying more or less if borrower has been late on a number of loan payments.

Explanation

When the borrower make the late payments, it creates a chance for defaults. The present value of the ...

b)

To determine

The reason behind paying more or less if the interest rate in the economy have been increased.

c)

To determine

The reason behind paying more and less if the borrower had declared high rates of profit.

d)

To determine

The reason behind paying more or less if the interest rate in the economy have been decreased.

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