Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Chapter 30, Problem 2DQ
To determine
Explain the subprime borrowers and prime borrowers.
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Why do the creditors generally charge higher interest rates on new borrowing?
Which of the following is NOT typically a role for a financial intermediary...?
make public financial statements of borrowers
evaluate the riskiness of lending to borrowers
pool funds from lenders
monitor the financial conditions of borrowers
What might cause interest rates to be low one year and high the
next?
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Economics: Principles & Policy
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Similar questions
- what are the economic goals of high-interest rate?arrow_forwardWhy are bonds somewhat risky to buy, even though they make predetermined payments based on a fixed rate of interest?arrow_forwardWhat type of bond is issued by state and local governments? Is there any risk that state and local governments might default on these bonds? What special feature do these bonds have that make them particularly attractive to certain taxpayers?arrow_forward
- Explain the difference of the demand of financial services of the rich and middle income people and poor people. *arrow_forwardWhat is an interest “reference rate,” and how is it used to set rates for individual borrowers? From the point of view of a borrowing corporation, what are credit and repricing risks? Explain the steps a company might take to minimize both.arrow_forwardHow does an increase in government borrowing affect the equilibrium interest rate in the market for loanable funds?arrow_forward
- Solve in a bond paper pleasearrow_forwardCompare credit, savings, and investment services available to the consumer from financial institutions.arrow_forwardExercise #1: Write two paragraphs on the impact of borrower liquidity (think, cash like assets and income) vs. equity (think, property value). These issues can be measured at loan origination, and also can and do change over the life of the loan. They are effected by macro-economic factors, like the local or general health of the economy and by personal factors like death, divorce, lost of employment, and over spending/poor financial management.arrow_forward
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