A.) Use the following information for the next two questions. Suppose the risk free rate is...

A.) Use the following information for the next two questions. Suppose the risk free rate is 4%. Consider the following three borrowers: A, B, and C. Their probability of repayment (p) is .95, .92, and .90, respectively, with associated gammas of .3, .4, and .6, respectively. Where gamma = % recovery in event of default. Which borrower would be charged the highest loan rate?

B.) How much would A's loan rate increase if the loan was unsecured?

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jeff jeffy answered 1 year ago

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