Would there be positive interest rates with no risk

Would there be positive interest rates on bonds within a world along with absolutely no risk (no default risk, maturity risk, and so on)? Why would lender demand and borrower be keen to pay, a positive interest rate within such a no risk world?

Yes, there would be positive rate of interest within risk-free world. It is because regardless of risk, lenders of money must postpone spending during the time the money is loaned. Lenders, then, lose the opportunity to invest their money for that period of time. In order to compensate for the cost of losing investment opportunities while they postpone their spending, lenders demand, and borrowers pay, a crucial rate of return, the real rate of interest.

View Complete Question

Related Questions in Finance Basics

Q : Equilibrium GDP for this hypothetical

Normal 0 false false

Q : State Section 31.00 Section 31.00 : It

Section 31.00: It is a Control Section of Budget Act which specifies some administrative procedures. For illustration, the section subjects to the Budget Act appropriations to different sections of the Government Code, restricts the new positions a de

Q : Define Price Increase Price Increase :

Price Increase: Budget adjustment to reflect the inflation factors for particular operating expenses constant with the budget instructions from the Department of Finance.

Q : Explain Budget Bill Budget Bill : The

Budget Bill: The legislation symbolizing the Governor’s proposal for spending authorization for the subsequent fiscal year. The Budget Bill is all set by the Department of Finance and submitted to each house of the Legislature i

Q : Explain intermediation Explain

Explain intermediation.The financial system makes it achievable for surplus and deficit economic units to come together, exchanging funds for securities, to their mutual profit. While funds flow from surplus economic units to a financial institu

Q : Short run and long run influence Normal

Normal 0 false false

Q : Define May Revision May Revision : The

May Revision: The annual update to the Governor’s Budget having a revised estimate of General Fund revenues for the present and ensuing fiscal years, any proposals to adjust expenditures to reflect the updated revenue estimates,

Q : Durable goods industries and

Normal 0 false false

Q : Explain Generally Accepted Accounting

Generally Accepted Accounting Principles (GAAP): The accounting rules, principles, conventions, and procedures which are employed for accounting and financial reporting. The GAAP for governments are put by the Governmental Accounting Standards Board (

Q : Making capital structure decisions In a

In a perfect capital market, what advice would you give a corporate financial manager on making capital structure decisions? Justify your advice. How and why would your advice change as real world capital market imperfections are introduced?

Discover Q & A

Leading Solution Library

Avail More Than 1459317 Solved problems, classrooms assignments, textbook's solutions, for quick Downloads

No hassle, Instant Access

Start Discovering

18,76,764

1947970
Asked

3,689

Active Tutors

1459317

Questions
Answered

Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!

Submit Assignment