A bank offers a corporate client a choice between borrowing cash at 9% per annum and borrowing Bitcoin at -5% per annum.
Posted: Tue Apr 26, 2022 10:51 am
A bank offers a corporate client a choice between borrowing cash
at 9% per annum and borrowing Bitcoin at -5% per annum. The
risk-free interest rate is 3% per annum, and storage costs are
7% per annum. The interest rates on the two loans are
expressed with annual compounding. The risk-free interest rate and
storage costs are expressed with continuous compounding. Suppose
that the price of Bitcoin is $58,000 and the corporate client wants
to borrow $1,160,000.
Discuss whether the rate of interest on the Bitcoin loan is too
high or too low in relation to the rate of interest on the cash
loan.
What is the correct rate of interest for Bitcoin loan?
at 9% per annum and borrowing Bitcoin at -5% per annum. The
risk-free interest rate is 3% per annum, and storage costs are
7% per annum. The interest rates on the two loans are
expressed with annual compounding. The risk-free interest rate and
storage costs are expressed with continuous compounding. Suppose
that the price of Bitcoin is $58,000 and the corporate client wants
to borrow $1,160,000.
Discuss whether the rate of interest on the Bitcoin loan is too
high or too low in relation to the rate of interest on the cash
loan.
What is the correct rate of interest for Bitcoin loan?