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2. Consider a world with two types of poor borrowers that are interested in taking loans for fund business projects: 1 Assume that the depositor

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2. Consider a world with two types of poor borrowers that are interested in taking loans for fund business projects: 1 Assume that the depositor repayment rate (" Z " in lect ure) equals 1. (a) What interest rate (Rhigh) would the lender like the charge high risk borrowers? (b) What interest rate (Rlow) would the lender like the charge low risk borrowers? (c) If the lender cannot observe borrowers' types, but knows the share of each in the population, what single interest rate (R) must it charge on loans? (d) Discuss what types of borrowers might opt to take out loans at this single interest rate. 2. Consider a world with two types of poor borrowers that are interested in taking loans for fund business projects: 1 Assume that the depositor repayment rate (" Z " in lecture) equals 1. (a) What interest rate (Rhhigh) would the lender like the charge high risk borrowers? (b) What interest rate (Rlow) would the lender like the charge low risk borrowers? (c) If the lender cannot observe borrowers' types, but knows the share of each in the population, what single interest rate (R) must it charge on loans? (d) Discuss what types of borrowers might opt to take out loans at this single interest rate

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