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What is a risk premium and who might take advantage of it

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1. Risk-Free Rate. What is a risk-free rate? Give an example of an investment with a risk-free rate. Why is there no risk?

2. Risk Premium. What is a risk premium? Who might take advantage of it?
Calculating a Risk Premium. How is the risk premium calculated?

3. Interest Rates. Where do financial institutions obtain funds for making loans? How are the interest rates for loans determined? Are the interest rates the same for all borrowers? Why or why not?

Reference no: EM131306375

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