Economics: Principles, Problems, and Policies, 19th Edition

Published by McGraw-Hill Education
ISBN 10: 0073511447
ISBN 13: 978-0-07351-144-3

Chapter 14 - Rent, Interest, and Profit - Questions - Page 310: 5b

Answer

A 20 dollar pawnshop loan has a high interest rate. Often there is a high chance that the good pawned will not be redeemed but the pawn owner is not bearing a risk. The pawned item has a resale value of greater than 20 dollars.

Work Step by Step

Pawn owners are not subject to same standards as government bonds. Generally they have higher interest rates as well.
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