Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Part 1: The Lender's Risk Hypothesis
Imagine a village in a developing country where there are competitive moneylenders. There is an exogenous probability (p) of default for every dollar lent out. Competition drives the interest rate down to a point where each moneylender earns zero expected profit on average (that is zero profit above the opportunity cost of lending the funds). Consider a typical moneylender. Let L be the total amount of funds he lends out, let r be the opportunity cost of funds for every moneylender, and let i be the interest rate charged in competitive equilibrium in the informal sector.
The expected profit of the moneylender is:
p(1+i)L -(1+r)L = 0
1. Solve for i in the above profit equation. That is, rearrange the equation so that you have: i = {something in terms of p and r}
Assume that r = 20%
2. What is the interest rate when p = 1? (i.e. when nobody defaults)
3. What is the interest rate when p = 0.5? (i.e. when there is a 50-50 chance of default)
4. Do you think it is unreasonable for a moneylender to charge interest rates above 100%? Explain.
Let X1, X2, X3, and X4 be independent continuous random variables with a common distribution function F and let p = P{X1 X2 > X3 X4}
In the past few years, outsourcing overseas has become more frequently used than ever before by U.S. companies. However, outsourcing is not without problems.
your restaurant serves an average of 23 customers per half hour. what is the probability that during the next half hour
provide two data setsa. construct a scatterplotb. find the value of the linear correlation coefficient r then determine
Why do you think configuration management and project change control are difficult to perform in the middle of a complex software development project.
Without using formulas, explain the meaning of (a) expected value of a random variable; (b) actuarial fairness; and (c) variance of a random variable.
Is it reasonable to conclude that this set of n = 16 people is not a representative sample of registered voters?
let x1...xn1 be an iid sample from nu1o2 and let y1...yn2 be an iid sample from nu2o2 where parameters u1u2 and o2 are
a box is to be constructed so that its height is five inches and its base is y inches by y inches where y is a random
marketing estimates that a new instrument for the analysis fo soil samples will be very successful moderate successful
An investment analyst collects data on stocks and notes whether or not dividends were paid and whether or not the stocks increased in price over a given period.
The following data reflect the number of defects produced on an assembly line at the Dear field Electronics Company for the past 8 days.
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd