Suppose a borrower with a 25% risk of default and no collateral wants to borrow from a lender whose alternative rate of return is 5%. What is the lowest interest rate that the lender will charge? [Enter your solution as a percent, e.g. 10 means 10% ]

Suppose a borrower with a 25% risk of default and no collateral wants to borrow from a lender whose alternative rate of return is 5%. What is the lowest interest rate that the lender will charge? [Enter your solution as a percent, e.g. 10 means 10% ]

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter16: Interest, Rent, And Profit

Section: Chapter Questions

Problem 1WNG

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Question

Suppose a borrower with a 25% risk of default and no collateral wants to borrow
from a lender whose alternative rate of return is 5%. What is the lowest interest rate
that the lender will charge? [Enter your solution as a percent, e.g. 10 means 10%]

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