Find the highest interest rate, Microeconomics

Assignment Help:

Find the highest interest rate:

There are 2 entrepreneurs, Sally and Paul.  The return to their projects are given by:

145_Find the highest interest rate.png

To finance the project, each entrepreneur needs to borrow from a bank an initial capital of 100.  The loan contract stipulates that if the project return is high, then the firms pays principal plus interests, and if the project return is low, then the bank seizes whatever value that the firm has left over.  Find the highest interest rate at which Sally is willing to borrow, the highest interest rate at which Paul is willing to borrow, and the bank's expected net profit if the interest rate is 10% and 18%, respectively.


Related Discussions:- Find the highest interest rate

Distinguish between fiscal and monetary policy, Problem: (a) Distingui...

Problem: (a) Distinguish between fiscal and monetary policy, giving examples where appropriate. (b) Explain how fiscal and monetary policies might be used by a government

Calculate the profit maximising price, Question: (a) Assume a firm ope...

Question: (a) Assume a firm operates in one location but serves on two distinct markets, namely, 1 and 2. The demand functions are: Market 1: P1 = 40 - 0.3 Q1 Market 2:

Money and banking., excess reserve make a bank less vulnerable to runs.why

excess reserve make a bank less vulnerable to runs.why

Economics of scale, give a detailed discussion on the term economics of sca...

give a detailed discussion on the term economics of scale as applied to economics, highting examples,limitation,and original of economics of scale.

Inverse demand function, Inverse Demand Function: If variable factor prices...

Inverse Demand Function: If variable factor prices changes, then the isocost line will tilt and consequently, the optimal factor requirement will be different. Suppose the wage rat

Profit, Profit: This is surplus left over after a company sells its output ...

Profit: This is surplus left over after a company sells its output and pays off cost of production (which includes raw materials, labour costs and a proportional share of its capit

The world bank, THE WORLD BANK: The World Bank is another of the 'Bret...

THE WORLD BANK: The World Bank is another of the 'Brettonwoods Twin Sisters'. The World Bank, as it obtains presently, is an  umbrella organisation, under which five different

Neutron diffraction, chemistry assignments ,  Neutron diffraction supplemen...

chemistry assignments ,  Neutron diffraction supplements x-ray diffraction and is particularly helpful in locating hydrogen atoms. An x-ray beam is scattered primarily as a result

Construct the balance sheet of the the total banking system, Suppose a bank...

Suppose a banking system with the following balance sheet has no excess reserves. Assume that banks will make loans in the full amount of any excess reserves that they acquire and

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd