2. Consider the model of Monitoring and Reputation in Freixas and Rochet 2.5.2 where there are two periods and two types of firms;a proportion f are strategic firms who can choose either project G or project B. Project G has the probability of success TG. and Project B has the probability of success TB.A proportion 1- f are non-strategic firms who always choose project B. Monitoring by banks only stops strategic firms from choosing B (it doesn't stop non-strategic firms). Financial markets cannot distinguish strategic from non-strategic firms but can distinguish successful from unsuccessful firms in period 2. Investors in the financial market are risk neutral and require an expected return equal to the riskless rate of interest which is zero (i.e. so that investors get their money back) Suppose that parameters are: - TG = G = 2, TB =,B = ,f = 8 = 0.5 and C = What is the probability a successful firm in period 1 is a strategic firm? A. B. C. E. None of A-D
2. Consider the model of Monitoring and Reputation in Freixas and Rochet 2.5.2 where there are two periods and two types of firms;a proportion f are strategic firms who can choose either project G or project B. Project G has the probability of success TG. and Project B has the probability of success TB.A proportion 1- f are non-strategic firms who always choose project B. Monitoring by banks only stops strategic firms from choosing B (it doesn't stop non-strategic firms). Financial markets cannot distinguish strategic from non-strategic firms but can distinguish successful from unsuccessful firms in period 2. Investors in the financial market are risk neutral and require an expected return equal to the riskless rate of interest which is zero (i.e. so that investors get their money back) Suppose that parameters are: - TG = G = 2, TB =,B = ,f = 8 = 0.5 and C = What is the probability a successful firm in period 1 is a strategic firm? A. B. C. E. None of A-D
Glencoe Algebra 1, Student Edition, 9780079039897, 0079039898, 2018
18th Edition
ISBN:9780079039897
Author:Carter
Publisher:Carter
Chapter10: Statistics
Section10.6: Summarizing Categorical Data
Problem 27PPS
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Transcribed Image Text:2. Consider the model of Monitoring and Reputation in Freixas and Rochet 2.5.2 where there
are two periods and two types of firms;a proportion f are strategic firms who can choose
either project G or project B. Project G has the probability of success TG. and Project B has
the probability of success Tg.A proportion 1- f are non-strategic firms who always choose
project B. Monitoring by banks only stops strategic firms from choosing B (it doesn't stop
non-strategic firms). Financial markets cannot distinguish strategic from non-strategic firms
but can distinguish successful from unsuccessful firms in period 2. Investors in the financial
market are risk neutral and require an expected return equal to the riskless rate of interest
which is zero (i.e. so that investors get their money back)
Suppose that parameters are: - TC =1,G = 2, TB = },B = },f = { 8 = 0.5 and C
1
20
What is the probability a successful firm in period 1 is a strategic firm?
A. 을
C.
E. None of A-D
B.
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