Author Question: In a two-period model with default, the nation defaults on its debt in the current period if A) ... (Read 78 times)

DelorasTo · **on:** Jun 30, 2018

In a two-period model with default, the nation defaults on its debt in the current period if

A) the market interest rate is high, the cost of defaulting is low, and national debt is high.
B) the market interest rate is low, the cost of defaulting is low, and national debt is high.
C) the market interest rate is high, the cost of defaulting is high, and national debt is low.
D) the market interest rate is low, the cost of defaulting is high, and national debt is low.

Question 2

A loan contract that requires the borrower to keep a certain percentage of its assets in cash is an example of ________.

A) screening
B) monitoring
C) a restrictive covenant
D) a patent contract