Question
How do you think of this paragraph. Please, give some suggestion. Investors will evaluate borrowers' risk by knowing borrowers' incomes or ability of paying back
How do you think of this paragraph. Please, give some suggestion.
Investors will evaluate borrowers' risk by knowing borrowers' incomes or ability of paying back to them. For example, if some companies want to borrow money from banks or the public, then they need to pay higher interest return rate to lead investors trust them. Since, compare to the U.S Treasury, which is regarded as risk-free, there are higher potential risks if investors invest their money to other companies. Thus, investors will consider the opportunity cost of capital, whether it is worth for them taking risk and lending money to borrowers if they can get higher return. Higher risk will provide higher return to investors if borrowers can guarantee to pay money back to investors.
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