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When we study a shift in supply or demand, we assume:
Commitment Fees
Fees charged by lenders to a borrower for an unused or untapped credit line, ensuring the lender retains availability of the funds.
Risk-Free Rate
The theoretical rate of return of an investment with zero risk, often represented by government bonds.
Compensating Balances
Minimum balance requirements imposed by financial institutions on certain accounts, which borrowers must maintain to compensate for the lower interest rate or fees on loans.
Speculative Opportunities
Investment options that carry a high risk of loss but also offer the potential for high rewards.
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