Suppose you have money to lend,but will do so only if you are compensated for the risk of default.If you set a high interest rate on your loan,a likely consequence is that ________.

Question

Quizplus · Accepted Answer

Safe borrowers are less likely to accept high interest rates as they have lower default risk, whereas risky borrowers may have no other option but to accept high interest rates. Therefore, setting a high interest rate is more likely to attract risky borrowers than safe borrowers.

Suppose You Have Money to Lend,but Will Do So Only