Question:

In the lecture slides, we derived the following expression while building a model of lending to the poor: Which of the following facts can be explained by this model? Recall that h= escape cost, w = wealth, D=cost of capital,c=xed cost, and R= gross interest rate. (Check all that apply.) a) Default rates are low h) Interest rates vary within a community based on individuals' wealth c) Lenders are not willing to lend if the fixed monitoring cost is too high cl) Interest rates on loans are higher than interest rates on deposits