--%>
Assignment Help - homework help

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.

 

   Related Questions in Finance Basics

  • Q : How do mergers influence consumers How

    How do mergers influence consumers?The effects mergers have on consumers differ widely. There may be some inconvenience and anxiety while a customer's bank or branch is obtained. The issuance of new account numbers and new checks is a familiar h

    		•
  • Q : Define Performance Budget Performance

    Performance Budget: A budget in which proposed expenditures are prepared and tracked mainly by measurable performance objectives for actions or work programs. The performance budget might also incorporate other bases of expenditure categorization, lik

    		•
  • Q : Determine per unit cost of production

    Normal 0 false false

  • Q : Define Legislative Counsel Digest

    Legislative Counsel Digest: The summary of what a legislative measure does contrasting the existing law and the proposed change. This summary emerges on the first page of the bill.

    		•
  • Q : Conditions in which warrants value high

    Under what conditions is a warrant's value high? Describe. A warrant's value would be great when the stock price, time to expiration, and/or expected stock price volatility is great.

    		•
  • Q : Fiscal policy Normal 0 false false

    Normal 0 false false

    		•
  • Q : Riskiness of portfolio with very low

    What happens to the riskiness of portfolio if assets along with very low correlations (even negative correlations) are combined? How successfully diversification decreases risk based on the degree of correlation among the two variables in questi

    		•
  • Q : Explain Proposed New Positions Proposed

    Proposed New Positions: It is a request for an authorization to use up funds to use additional people to execute work. Proposed new positions might be for limited time periods (that is, limited term) and for full or less than full tim

    		•
  • Q : Describe formula to figure out

    Normal 0 false false

    		•
  • Q : What is Proposition 98 Proposition 98 :

    Proposition 98: An initiative passed in the year November 1988, and amended in the year June 1990 election, which provides a minimum funding guarantee for school districts, community college districts, and other state agencies which give direct elemen

    		•