To determine the supply of lending to low-income nations, we calculate expected returns, which depend on the probability of repayment. The probability is related in the following way to various factors.

Question

Quizplus · Accepted Answer

The probability of repayment is generally negatively correlated to both the size of total debt and the volatility of GDP. A larger total debt increases the risk of default, and higher GDP volatility indicates economic instability, which also increases the risk of default.

To Determine the Supply of Lending to Low-Income Nations, We