Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

2. Samantha has two friends, Adam and Olga. Each of them has also $5,000 extra dollars that they can put into the financial market. The

image text in transcribed

2. Samantha has two friends, Adam and Olga. Each of them has also $5,000 extra dollars that they can put into the financial market. The following table shows the rate of return that each friend expects to obtain on their funds by the end of the year: Individual Return Samantha 6% Adam 10% Olga 18% Assume that the three friends can freely borrow and lend to each other at an interest rater, so they can increase or decrease the amount of funds they have available to put in the financial market. a) Ifr is 9%, which of the friends will choose to borrow? (1 point) Which of the friends will choose to be a lender? (1 point) What is the quantity supplied of loanable funds? (1 point) What is the quantity demanded? (1 point) Is this market for loanable funds in equilibrium? (1 point) Assume that when the expected rate of return is equal to r, there is no incentive to either borrow or lend. What is the equilibrium interest rate in this market? (2 b) 2. Samantha has two friends, Adam and Olga. Each of them has also $5,000 extra dollars that they can put into the financial market. The following table shows the rate of return that each friend expects to obtain on their funds by the end of the year: Individual Return Samantha 6% Adam 10% Olga 18% Assume that the three friends can freely borrow and lend to each other at an interest rater, so they can increase or decrease the amount of funds they have available to put in the financial market. a) Ifr is 9%, which of the friends will choose to borrow? (1 point) Which of the friends will choose to be a lender? (1 point) What is the quantity supplied of loanable funds? (1 point) What is the quantity demanded? (1 point) Is this market for loanable funds in equilibrium? (1 point) Assume that when the expected rate of return is equal to r, there is no incentive to either borrow or lend. What is the equilibrium interest rate in this market? (2 b)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Essentials Of Investments

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

8th Edition

0077606779, 978-0697789945

More Books

Students also viewed these Finance questions

Question

2. To identify examples of each.

Answered: 1 week ago

Question

=+b) Should the company send the fact-finding trip? Explain.

Answered: 1 week ago