Finance and Marketing Question

Anonymous
timer Asked: Feb 6th, 2019
account_balance_wallet $5

Question Description

suppose two types of firms wish to borrow in the bond market. firm of type
A are good financial health and are relatively low risk. the appropriate
premium over the risk-free rate of lending to these firms is 2 percent.
firms of type B are in poor financial health and are relatively high risk.
the appropriate premium over the risk-free rate of lending to these firms
is 6 percent. as an investor, you have no other information about these
firms except that type A and type B firm exist in equal numbers.

A. at what interest rate would you be willing to lend if the risk free
rate were 5 percent?
B. Would this market function well? What type of asymmetric information
problem does this example illustrate?


simple answer

Tutor Answer

parensmalls
School: Duke University

Hello buddy, i have su...

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Review

Anonymous
Tutor went the extra mile to help me with this essay. Citations were a bit shaky but I appreciated how well he handled APA styles and how ok he was to change them even though I didnt specify. Got a B+ which is believable and acceptable.

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