--%>
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 : Fixed Income I need solution by Tuesday

    I need solution by Tuesday evening March 18, 6 pm EST

    		•
  • Q : Describe equilibrium price and quantity

    Assume the market for widgets can be described by the given equations:                     Demand: P = 10 - Q             &

    		•
  • Q : Reducing payroll costs It is likely

    It is likely that in the next few years, employers will face incresing pressures to reduce their payroll costs. critically evaluate the range of ways by which payroll costs can be reduced whilst taking into account the need to maintain a focus on the

    		•
  • Q : Types of legal barriers to market entry

    Types of legal barriers to market entry exist: Kinds of legal barriers which make that difficult for the newer drug in the generic form towards entering market have been lack of the rigorous assessment about the patentability needs; thirty mouth stay

    		•
  • Q : Describe Section 28.00 Section 28.00 :

    Section 28.00: It is a Control Section of Budget Act which authorizes the Director of Finance to support the augmentation or diminution of items of expenditure for the receipt of un-anticipated federal funds or other non-state funds, and which identif

    		•
  • Q : Clarify the duties of the financial

    Clarify the duties of the financial manager within a business firm.Financial managers measure the firm's performance, find out what the financial consequences will be if the firm maintains its present course or changes it, and suggest how the fi

    		•
  • Q : What can a financial institution do for

    What can a financial institution frequently do for a surplus economic unit which it would have complexity doing for itself if the surplus economic unit (SEU) were to deal directly along with a deficit economic unit (DEU)?Usually, Surplus economi

    		•
  • Q : What is Make-Buy Analysis Make-Buy

    Make-Buy Analysis: Business decision which compares the costs and advantages of manufacturing a product or product component alongside purchasing it. When the purchase price is high than what it would cost the manufacturer to prepare it, or when the m

    		•
  • Q : Question based on change in GDP Normal

    Normal 0 false false

  • Q : Unsustainable previous interest rate

    Normal 0 false false