Business, 26.03.2021 06:20 logan541972

1. Suppose two types of firms wish to borrow in the bond market. Firms of type A are in good financial health and are relatively low risk. The appropriate premium over the risk-free rate of lending to these firms is 2%. Firms of type B are in poor financial health and are relatively high risk. The appropriate premium over the risk-free rate of lending to these firms is 6%. As an investor, you have no other information about these firms except that type A and type B firms exist in equal numbers. a. At what interest rate would you be willing to lend if the risk-free rate were 5%

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1. Suppose two types of firms wish to borrow in the bond market. Firms of type A are in good financi...