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RISK PREMIUM: This has two very closely related uses. First, it's what risk averse people are willing to pay to avoid a risky situation. For example, if you would be equally happy with a guaranteed $900 or a 50-50 chance of getting either $500 or $1,500, then you're risk premium is $100. Second, it's the extra percentage points added to an interest rate to compensate for the risk of a loan. As a general rule, each 1 percent chance of default on a loan adds a risk premium of about 1 percent to the interest rate.
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PRINCIPAL-AGENT PROBLEM A disconnection or conflict between the objectives and goals of the principal and those of the agent authorized to represent the principal. The principal-agent problem arises because an agent is given the responsibility and authority to take actions that affect both the principal, but can also affect the agent. This problem is common in corporate management, where the principal is shareholders and the agent is managers. It is also common in government, where the principal is the public and the agent is elected leaders.
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Okun's Law posits that the unemployment rate increases by 1% for every 2% gap between real GDP and full-employment real GDP.
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"You can't use up creativity. The more you use, the more you have. " -- Maya Angelou, poet
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BQ
Basic Qoute
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