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Now suppose that the bank is willing to lend to anyone on the condition. Explain how you expect potential borrowers to form groups of 2-borrower pairs.
Follow-up from your answer to the previous exercise: what is the upper bound of the discount rate? Briefly explain your answer.
What strategies will the borrower and the inside lender choose and why? Will these strategies change if inside lender increases the interest rate to R = 200%?
Explain why ROSCAs are so common in nearly all low-income economies these days. In what way have microfinance institutions resolved some of ROSCAs' limitations?
Consider again the problem described in appendix 3A, and show that the expected utility. What problems may arise from having too many participants in a ROSCA?
Explain when it might make sense for Hershey to lease an asset. Under what conditions should Hershey lease its computer systems?
Under what conditions would firm want a fixed interest rate, and under what conditions would it want the rate to fluctuate with the prime rate?
Consider a microfinance institution's objectives. What trade-off might it face when deciding between lending to women or to men?
Provide at least three reasons why, relative to men, women may be better clients, from the standpoint of a microfinance enterprise.
Provide at least three reasons why microfinance can potentially benefit women. What does this say about empowerment? Is there a contradiction?
What rate of interest was paid, based on the pesos received and paid by the treasurer? Show how your result illustrates the interest rate parity theorem.
What was the percentage devaluation or revaluation of the yen in terms of the U.S. dollar?
You have priced two pure discount bonds, each with 5 years to maturity and with a face value of $1000. Why does the second bond sell for less than the first?
Evaluate each of the arrangements in favor of today's organized securities exchanges relative to OTC markets. Why might an investor want to sell short?
Why might the institution provide social benefi ts, even though the interest rate it charges is high relative to those charged by commercial banks?
Compare your answers to questions (a) and (b) and briefl y explain what this simple numerical exercise reveals about government intervention in credit markets.
What does this simple numerical exercise reveal about the design of government interventions to assist poor individuals' businesses?
An entrepreneur has an idea for a profitable project, but she is unsure. In which of the two countries should she invest? Briefly explain your answer.
Draw a graph showing how credit markets can be inefficient when a potential borrower lacks assets that can be used as collateral to gain access to loans.
Based on these two examples, explain why the marginal return to capital might be high for a rich entrepreneur and low for a poor entrepreneur.
Explain why investing in Kenya or Bolivia might seem riskier than investing in her own country.
Draw the production possibilities frontier for each country. Suppose the countries specialize. Which country will produce cars?
Currently, Eleanor and Joanna collect one gallon of milk each and as many eggs as they can. How many dozens of eggs does the family have per week?
What are the chief elements of Pollin's proposal to transform the Fed? How would the Fed's focus and decision-making change?
What is the differenebetwen gross medical services revenue and net medical service revenue? What is balance billing?