Question
In: Economics
Consider a loan contract signed between a lender (e.g., a bank) and a borrower. Would the...
Consider a loan contract signed between a lender (e.g., a bank) and a borrower. Would the lender benefit or lose from inflation in the country? Explain your reasoning in a few sentences.
Solutions
Expert Solution
Answer -
Inflation is the rate of increase in general price level of goods
and services without rise in income of the people.
The lender (i.e.bank) benifits from inflation when it expanding new
finance. Because of inflation people need more credit for buying
goods and services as their income level remains same in spite of
rising prices.In this situation as people preferred to borrow money
from banks .Higher amount of loans and advances benefits to banks
for earning more interest.
For example,if the price of Air conditioner increases from $1500 to
$1600 due to inflation the banks can earn more interest.,as 10%
interest on $1600 is more than 10% interest on $ 1500.Thus lender
can be benefited from inflation.
Rahul Sunny answered 2 years agoRelated Solutions
Is a currency swap contract a debt obligation that involves a borrower and a lender? Why...
Is a currency swap contract a debt obligation that involves a
borrower and a lender? Why or Why not?
A borrower and lender agree that a 9,000,000 loan made at 12% interest for 30years will...
A borrower and lender agree that a 9,000,000 loan made
at 12% interest for 30years will have a 600,000 balance on the
maturity date if the loan will be on constant amortization mortgage
(CAM) terms. Determine how much will be paid monthly and prepare a
loan payment schedule for the first 4 months.
Identify some risk factors that would indicate to a lender that a potential borrower may be...
Identify some risk factors that would indicate to a lender that
a potential borrower may be a high risk. (Detail borrowing risk
factors).
Suppose that a bank makes a loan to a firm and that the loan contract specifies...
Suppose that a bank makes a loan to a firm and that the loan
contract specifies that the firm is not to engage in certain lines
of business. Why would the bank make such a provision?
Why do we need government regulations of the financial system
with respect to the information problem?
On January 1, 2020, Empress Bank granted a loan to a borrower. The interest on the...
On January 1, 2020, Empress Bank granted a loan to a borrower.
The interest on the loan is 10% payable annually starting on
December 31, 2019. The loan matures in three years on December 31,
2022. Principal amount 5,000,000 Direct origination cost incurred
457,500 Origination fee charged against the borrower 200,000 After
considering the origination fee charged against the borrower and
the direct origination cost incurred, the effective rate on the
loan is 8%.
Determine the carrying amount of the...
A borrower borrows on a five year loan $5,000 from a bank at 10% and will...
A borrower borrows on a five year loan $5,000 from a bank at 10%
and will pay back the loan in ten equal $ payments (semi-annually)
at the end of each time period. How much is each equal
payment, how much principal and interest is paid back, and how much
interest is paid back?
On January 1, 2020, Empress Bank granted a loan to a borrower. The interest on the...
On January 1, 2020, Empress Bank granted a loan to a borrower.
The interest on the loan is 10% payable annually starting on
December 31, 2019. The loan matures in three years on December 31,
2022.
Principal amount
5,000,000
Direct origination cost incurred
457,500
Origination fee charged against the borrower
200,000
After considering the origination fee charged against the
borrower and the direct origination cost incurred, the effective
rate on the loan is 8%.
Determine the carrying amount of the...
What is the relationship between net borrower, net lender, debtor nation, and creditor nation?
What is the relationship between net borrower, net lender,
debtor nation, and creditor nation?
Solid bank loan P5 million to a borrower on January 1, 2018. The terms of the...
Solid bank loan P5 million to a borrower on January 1, 2018. The
terms of the loan require principal payments of P1 million each
year for five years plus interest at 8%.
The first principal and interest payment is due on January 1,
2019. The borrower made the required payments during 2019 and 2020.
However, during 2020 the borrower began to experience financial
difficulties, requiring the bank to reassess the collectibility of
the loan.
On December 31, 2020, the bank...
A construction company signed a loan contract at 6.73%compoundedannually, with the provision to pay $785 at...
A construction company signed a loan contract at
6.73%compoundedannually, with the provision to pay $785 at the
end of each month for three years.
(a) What is the amount of the loan?
(b) How much will be owed at the end of nineteen months?
(c) How much of the principal will be repaid within the first
nineteen months?
(d) How much interest is paid during the first nineteen
months
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- This is all one question, thank you so much in advance! You must evaluate the purchase...
- 10. Consider a market in which there is a monopoly manufacturer and a mo nopoly retailer....
- Write a function fun(x) that takes as input a positive number x and solves the following...
- Describe the principles and operations of movement sensors: Doppler-Effect Velocity sensor and Spring-Mass Accelerometor; State the...
- This is all one question, thank you so much in advance. The Bigbee Bottling Company is...
- For Questions 1-3: consider the following code: public class A { private int number; protected String...
- You are tasked with assessing the health department’s intervention program in preventing recurrence of acute alcohol...
ADVERTISEMENT