Question

Your former college roommate calls you and asks to borrow $10,000 so that he can open a pizza restaurant in his hometown. In justifying this request, he argues that there must be significant demand for pizza and other fast food in his hometown because there are lots of such restaurants already there and three or four new ones are opening each month. He also argues that demand for convenience food will continue to increase, and he points to the large number of firms that we’ll now sell frozen dinners and grocery stores. What are the risks involved in choosing to lend him money?

Answer 1

Answer:

The risks involved in lending him the money are

1. After lending him the money, there is no assurance that he would make sales in case of him not been the only one opening a pizza restaurant and also they had been other ones there which can't guarantee that he will be able to pay back as soon as possible