Lecture 4-M&B Understanding Interest Rate-Market for Loanable Funds

Lecture 4-M&B Understanding Interest Rate-Market for Loanable Funds

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
Understanding Interest Rates
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Market for Loanable Funds L oanable Funds Market: Hypothetical model that examines the market outcome of the demand for funds generated by borrowers and the supply of funds provided by lenders. The interest rate is the price , calculated as a percentage of the amount borrowed, charged by the lender to a borrower for the use of their savings for one year.
Background image of page 2
Demand for Loanable Funds
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Supply of Loanable Funds
Background image of page 4
Equilibrium in Loanable Funds
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Market for Loanable Funds The Distinction between Interest Rates and Returns: The rate of return of a project is the profit earned on the project expressed as a percentage of its cost.
Background image of page 6
Equilibrium in Loanable Funds
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Invest or Not Invest The Cuppa Coffee Company is considering investing in a new high tech coffee roaster: Interest rate in the loanable funds market = 7% Projected revenue from new roaster = $100,500 Estimated cost of the new project = $93,000
Background image of page 8

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 15

Lecture 4-M&B Understanding Interest Rate-Market for Loanable Funds

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online