Question
Suppose you take a loan of $18,000 from a bank at an interest rate of 18% per annum for a period of 5 years. You
Suppose you take a loan of $18,000 from a bank at an interest rate of 18% per annum for a period of 5 years. You repay the loan for the 18 months and then stop servicing the loan due to some unforeseen circumstances.
i. What will be the size of credit risk in dollars for banks as a result of your inability to repay the rest of the loan?
ii. How would this affect the liquidity of the bank?
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Economics Of Money Banking And Financial Markets
Authors: Frederic S. Mishkin
6th Edition
0321113624, 978-0321113627
