New answers tagged risk
0
Indeed the demand for risk free assets increases but assets are different from goods. For goods, consumers pay the price but for assets, banks pay to consumers. With more consumers, banks have more power to argue price, so they would like to set a lower price: lower interest rate. For consumers, they want higher payoff but now they have lower market power ...
3
Here is the excel formula with steps:
=NORMSDIST((NORMSINV(0.02)+NORMSINV(0.999)×SQRT(0.1))/SQRT(1−0.1))
=NORMSDIST((−2.054+3.09×SQRT(0.1))/SQRT(1−0.1))
=NORMSDIST(-1.135)
=12.8%
They keep changing the names of the function - e.g., NORMSDIST is NORM.S.DIST(-1.135,TRUE)in the recent versions, and same for NORMSINV = NORM.S.INV
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