Question
Which of the following statement about the contractually promised return on a loan is INCORRECT? Select one: a. Other things being equal, an increase in
Which of the following statement about the contractually promised return on a loan is INCORRECT?
Select one:
a. Other things being equal, an increase in compensating balance would increase the cost of borrowing for the borrowers.
b. Other things being equal, an increase in credit risk premium would increase the cost of borrowing for the borrowers.
c. For a given promised gross return on a loan, k, FI managers can use the pricing formula to find various combinations of fees, compensating balances, and risk premiums they may offer their customers that generate the same returns.
d. Other things being equal, an increase in reserve requirement would increase the cost of borrowing for the borrowers.
e. When compensating balances are held as time deposits they earn interest. As a result, borrowers opportunity losses from compensating balances have been reduced to the difference between the loan rate and the compensating balance time-deposit rate.
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