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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
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)
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