Consider the case where the borrower has some wealth of his own (k) that he can

Question

Consider the case where the borrower has some wealth of his own (k) that he can invest in the project. His expected re schedule would be: turns What does the last term in the above equation stand for? Select one: O a. It is equal to what the borrower expects to get but doesn't get at the end of the period b. it is equal to what the borrower would have received at the end of the period ifhe had not invested his wealth in a risky project. O c.It is equal to what the borrower now doesn't need to pay to the lender (because of his own wealth). o d. It is equal to what the borrower earns from the project Consider the case of a monopolistic lender interacting with a borrower who has some wealth. The higher the own wealth invested in the project, the Choose the level of risk that the borrower will set for each given interest factor. At the same time, as the own wealth invested by the borrower increases, the lender will charge a Choose overall effect of an increase in own wealth (k) on the level of risk (f) is Choose interest factor. As a result, the

Explanation / Answer

First question is answered below

1. Correct option: (b)
Reason: It refers to the opportunity cost of investing money in a risky project. That is, it equals what the borrower might have earned had he not invested money in a risky project

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