EBK FINANCIAL MARKETS AND INSTITUTIONS
EBK FINANCIAL MARKETS AND INSTITUTIONS
7th Edition
ISBN: 9781260166101
Author: SAUNDERS
Publisher: YUZU
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Chapter 20, Problem 13Q
Summary Introduction

To discuss: The reason a lender’s expected return be very lower when the risk premium is increased on a loan.

The risk premium on the loan is the difference between the interest rate imposed by the banks’ loan to the private sector and the “risk-free” Treasury bill interest rate at which government issues short term securities which are traded in the market.

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