l T-Mobile bbhosted.cuny.edu QUESTI 10 points Save Answer A bank has a cost of f

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l T-Mobile bbhosted.cuny.edu QUESTI 10 points Save Answer A bank has a cost of funds of 12%, a default rate of 5% and transaction cost of $25 per loan. To break even on a $100 loan, the bank must charge $12 to cover cost expected defaults, and $25 to same costs above, the break The interest rate for the $100 is than the rate for fixed c.43%, lower, variale 25%, higher, variable Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All Answers Close Window Savc and Stibmit

Explanation / Answer

##. For 300 loan, interest = (12 + 5 + 25/300) = 25.33% ~ 25%

Interset for 100 loan is Higher than 300 loan due to fixed transaction cost

## Ex- post moral hazard occurs when one party cheats after occurence of event. So (a)

## Ex - ante moral hazard occurs when one party doesnt perform optimally before occurence of event. So (d)

## (a) Production function.

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