--%>
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 : What are Tax Expenditures Tax

    Tax Expenditures: The subsidies offered via the taxation systems by generating deductions, credits and exclusions of certain kinds of income or expenditures which would otherwise be taxable.

    		•
  • Q : Explain 3-year Expenditures and

    3-year Expenditures and Positions: The display at the beginning of each departmental budget which presents the different departmental programs by title, dollar totals, places, and source of funds for the past, current, and budget years.

    		•
  • Q : Government requirements imposed on

    Describe some of the government requirements imposed onto a public corporation which are not imposed on a private, intimately held corporation? Public corporations ought to submit audited financial statements to the government for release to the

    		•
  • Q : Pitfalls when two companies merge Other

    Other than pricing, some pitfalls that consumers might have to deal with when two major companies merge.

    		•
  • Q : Describe compensating balances its need

    Describe compensating balances and why do banks needs them from some customers? Under what situation would banks be most likely to impose compensating balances? Compensating balances are funds that a bank needs a customer to maintain in a non-i

    		•
  • Q : What are Salaries and Wages Supplement

    Salaries and Wages Supplement: The annual publication issued in a while after the Governor's Budget, including a summary of all positions by department, unit, and categorization for the past, present, and budget years, as of July 1 of the present year

    		•
  • Q : Mascot Simulation Simulation with

    Simulation with Crystal Ball Provided Workbook: Mascot Simulation Relevant Readings:"Discounted Cash Flow Modeling" folder + Text

    		•
  • Q : Firm risk of any capital budgeting

    Describe how to measure the firm risk of any capital budgeting project. The firm risk of a capital budgeting project measures the effect of adding a new project to the present projects of the firm.

    		•
  • Q : Effect of bank charges discount

    What happens while a bank charges discount interest on a loan? While a bank charges discount interest on a loan the required interest payment is subtracted through the loan proceeds at the time the loan is made. It makes the effective interest

    		•
  • Q : Can a corporation contain too much

    Can a corporation contain too much working capital? Describe. A firm can contain too much working capital if this is losing the chance to invest in high returning fixed assets and if this goes beyond the amount of working capital required for r

    		•