Question: QUESTION 1 ( b ) [ 5 marks ] Why could a lender's expected return be lower when the risk premium is increased in a

QUESTION

1 (

) [5

marks

]

Why could a lender's expected return be lower when the risk premium is increased in a loan? Discuss how collateral and fees can increase the lender's expected return. What impact do inflationary pressures have on returns for the bank? Be specific on all parts of the question.

QUESTION 1(b)[5 marks] Why could a lender's expected return be lower

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