Question
Suppose interest rates on residential mortgages of equal risk were 8 percent in California and 10 percent in New York. Could this differential persist? What
Suppose interest rates on residential mortgages of equal risk were 8 percent in California and 10 percent in New York. Could this differential persist? What forces might tend to equalize rates? Would differentials in borrowing costs for businesses of equal risk located in California and New York be more or less likely to exist than differentials in residential mortgage rates? Would differentials in the cost of money for New York and California firms be more likely to exist if the firms being compared were very large or if they were very small? What are the implications of all the trend for the financial to become large megabanking organizations and to engage inin nationwide branching?
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