A colleague tells you that he can get a business loan from the
bank, but the rates seem very high for what your colleague
considers a low risk loan.
• Give an adverse selection explanation for this, and offer
advice to your friend on how to solve the problem.
•Give a moral hazard explanation for this, and offer advice to
your friend on how to solve the problem.
A colleague tells you that he is purchasing a health insurance
policy, but the premiums seem very high for the level of
coverage.
Use the following table to classify each explanation for the
high premiums as an instance of either adverse selection or moral
hazard.
Explanation for High Premiums
Adverse Selection(yes or no)
Moral Hazard (yes or no)
The insurance company cannot determine which customers are
healthy and which are unhealthy.
The insurance company believes that the health insurance will...
A friend tells you that he plans to open a business in which he
will entertain children at birthday parties. He says he will offer
a new entertainment in which he dresses up like a dinosaur,
something many children love.
What do you advise him about the possible future of his
business? In your answer use the concepts of economies of scale,
barriers to entry, and monopolistic competition.
A friend tells you that he plans to open a business in which he
will entertain children at birthday parties. He says he will offer
a new entertainment in which he dresses up like a dinosaur,
something many children love.
What do you advise him about the possible future of his
business? In your answer use the concepts of economies of scale,
barriers to entry, and monopolistic competition.
Suppose you get $500, 000 mortgage loan from a bank and you have
a two options to repay.
option one: pay $620, 000 after 10 years as a one time
payment
2. Repay $30,000 at the end of every year for infinite years
Which has a lower interest rate?
please describe how to get the answer, thanks
Assume that you are a Loan Officer at the local bank. Company A
wants to get a long-term loan from your bank.
Company B wants to get a long-term loan from your bank. Company C
also wants to get a long-term loan from your bank.
The TOTAL DEBT RATIO for Company A is .70 and the TIMES INTEREST
EARNED RATIO for Company A is .70 for the year.
The TOTAL DEBT RATIO for Company B is .75 and the TIMES...
Suppose a bank makes a loan to a small business so that
business can purchase a new machine press. Which of the following
are true of that event--that is, of the bank lending to the
business? (you can choose multiple answers)
a. The business takes on a liability in the form of the loan
agreement (the business' promise to repay the loan)
b. The bank becomes more liquid
c. The bank holds an asset in the form of the checking...
A person decides to get a loan from the bank (today) to finance
buying a piece of land. The borrowed amount is equal to $140,000.
The arrangements with the bank state that the loan will be paid off
in 96 equal monthly payments, based on an annual market/combined
rate of 12% compounded monthly.
a) Calculate the monthly payment considering the given
market/combined rate. (10 points)
b) If the monthly inflation rate is estimated to be 0.5%,
calculate the value of...
A person decides to get a loan from the bank (today) to finance
buying a piece of land. The borrowed amount is equal to $140,000.
The arrangements with the bank state that the loan will be paid off
in 96 equal monthly payments, based on an annual market/combined
rate of 12% compounded monthly.
a) Calculate the monthly payment considering the given
market/combined rate. (10 points)
b) If the monthly inflation rate is estimated to be 0.5%,
calculate the value of...
3. An entrepreneur can get cash from: Savings, personal
loans. credit cards, bank loan, venture capital and angel
investors, government programs, corporate programs, crowdfunding
and crowdlending.
Select two of these options. Compare them. Where can
these funding options be obtained? In 100 words or more, explain
why you would picked these options for funding your
business.