Discuss why you would expect the saving-borrowing pattern to differ by occupation (for example, for a doctor versus a plumber).
Saving and Borrowing:
The saving and borrowing among different individuals vary inversely. Generally, a person will borrow when the needs are high, and the income is low. On the other hand, an individual will save where the need is low, and the income is high.
Answer and Explanation:
The saving-borrowing patter will differ by occupation for the following reasons:
- Level of income. A person with a high level of income can set aside some amount of money to savings, unlike one with limited income. Due to the high level of savings, the individual may not be subjected to high borrowing as compared to one with low income, thus fewer savings.
- Income consistency. An investor with a consistent income, such as a doctor, is likely to have a better and more regular saving plan than and individual without a steady income such as a plumber. On the other hand, the plumber may be subjected to more borrowing due to inadequate income, unlike a doctor.
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from Finance 305: Risk ManagementChapter 3 / Lesson 3