1. If Ahmad can buy a car today for $ 5000, the car will worth $ 10,000 in extra income to Ahmad next year because he will use the car to do his business. Should Ahmad borrow the $ 5000 for the loan shark at 90% interest if no one else could lend this money to Ahmad? Will Ahmad be better or worse off as the result of borrowing the money from the loan shark? Why do loan shark care less about moral hazard when lending money compared to commercial banks? Can you make a case for legalizing loan shark? Note: Your answers should be detailed with proper references.

1. If Ahmad can buy a car today for $ 5000, the car will worth $ 10,000 in extra income to Ahmad next year because he will use the car to do his business. Should Ahmad borrow the $ 5000 for the loan shark at 90% interest if no one else could lend this money to Ahmad? Will Ahmad be better or worse off as the result of borrowing the money from the loan shark? Why do loan shark care less about moral hazard when lending money compared to commercial banks? Can you make a case for legalizing loan shark? Note: Your answers should be detailed with proper references.

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter11: Investor Losses

Section: Chapter Questions

Problem 3RP

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