Assuming we are under monopoly and asymmetric information, what is the highest interest for which both types (safe and risky) stay in the market?If this market is composed of 50% safe borrowers and 50% risky borrowers. What is the expected profit function (per loan) for the lender when the interest rate is 0.7?

If this market is composed of 50% safe borrowers and 50% risky borrowers. What is the expected profit (per loan) for the lender when the interest rate is 1.5?

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400.00 300.00 200.00 100.00 0.00 -100.00 -200.00 -300.00 0.5 1 Objective functions -E(YS) 1:5 -E(YR) 2 E(NS) 2,5 -E(NR) 3.5 400.00 300.00 200.00 100.00 0.00 -100.00 -200.00 -300.00 0.5 1 Objective functions -E(YS) 1:5 -E(YR) 2 E(NS) 2,5 -E(NR) 3.5

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To determine the highest interest rate for which both safe and risky borrowers stay in the market we ... View the full answer