Many reporters in the media were critical of the high interest rates that many banks charged to lenders in the so-called sub-prime market. Using economic reasoning what was the likely justification for these high interest rates
What will be an ideal response?
The sub-prime market served borrowers who otherwise would not have been able to get credit because of their poor credit history or low income or combination of the two. In order for banks and mortgage companies to find it in their interest to serve these clients they charged a premium above and beyond what they would typically charge clients with better credit histories since there was a greater chance of their defaulting.
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Explain how the labor force participation rate and the unemployment rate change in a recession
What will be an ideal response?
Suppose a bank has $10 million in capital, $100 million in assets, and after-tax profit of $2 million? what is its return on assets? What is its return on equity?
What will be an ideal response?
The term time inconsistency is used to describe:
A. a situation in which we regret choices we make simply because of when we made the choice. B. a situation in which we change our minds about what we want simply because of the timing of the decision. C. people's inability to correctly predict how their current choices will affect them in the future. D. people's inability to make choices today that determine their actions in the future.
Consumer surplus increases whenever the price of a good increases
a. True b. False Indicate whether the statement is true or false