Evaluating Lending Strategies for Maximum Revenue
A commercial lender has $1,000,000 available to lend. They are considering two strategies:
- Lend the entire $1,000,000 to a single, large corporation at a 5% interest rate.
- Lend the money as one hundred separate $10,000 loans to small businesses, each at a 7% interest rate.
Assuming all loans will be fully repaid, evaluate which strategy would be more financially beneficial for the lender in terms of revenue generation. In your response, calculate the total revenue for each strategy and explain the relationship between the loan principal, interest rate, and the resulting revenue that leads to your conclusion.
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