In a credit market, type B borrowers repay 89% of the time and type C repay 76% of the time. They both want a loan for $200. The bank cannot observe type, but figures the population of borrowers is divided up such that 75% are type B and the rest are type C. In this case, the competitive pooling rate on the loans is? 10.4% 12.4% O 14.4% O 17.0%
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- Now suppose agent C can produce private information about the true realization x at t=1 at the cost γ=4. Suppose lA=lB=φA=φB=1 and x is either 40 or 100 with equal probability and w=70. - At t=1, agent B owns the bond. What is the maximum amount LB that agent B can borrow with probability 1?- At t=0, what amount LA can agent A borrow from agent B in a repo trade at t=0 and what is the haircut in equilibrium?. Wood, the receiver of Stanton Oil Company, suedStanton’s shareholders to recover dividends paid to themfor three years, claiming that at the time these dividendswere declared, Stanton was in fact insolvent. Wood didnot allege that the present creditors were also creditorswhen the dividends were paid. Were the dividendswrongfully paid? ExplainThe Financial Markets proficiency has been more inclined to interest rates productssuch as loans and term deposits in Zambia than structured products. With the adverseeconomic repercussions that countries, including Zambia experienced during theoutbreak of COVID-19, the market has moved to structured products provision such asoptions, forwards, to mention but a few. The implementation of risk mitigation strategicby most companies made the financial market to enhance structured products that aresuitable to hedge all risks arising from investments and business operations.Assuming Zambeef employees you as the Investment Hedging Director to manage theinvestment in Zambia, you approach your bank, Standard Chartered Bank to structurean option to help hedge Zambeef future shares transactions. You enter into a 5 yearscall option contract at an exercise price of K350 and paid option premium amounting toK50. Three years later, the company has an increase in operational needs and decidesto assess…
- Suppose we have another firm known as the Sanda Corporation which makes a product known as "Delgados". Suppose that its FC=$2,000 and its TC=$5,000 and its AVC=$48. What is the ATC? O $20.50 O $70 O $80 O $100 O Not enough informationSuppose there exist n = 1000 firms that seek to gain access to a small niche market that is regulated. Suppose that one firm will obtain access and that will get that firm an additional R = $50,000 in profits. Each firm already receives $1 million in profits from other ventures. a. Suppose the probability of winning the rents is linear in investment, each firm has an equal chance of winning and they are all risk-neutral. How much will each firm invest in rent-seeking? Are the rents fully dissipated? b. Suppose instead that the probability of winning changes with the amount invested in rent-seeking, so that each firm’s odds of gaining access are π(n,I) = I1/2 /n. Is the probability of winning increasing or decreasing in investment? Are there diminishing returns to rent-seeking? c. How much will each firm invest in rent-seeking? Are the rents fully dissipated, less than fully dissipated, or more than fully dissipated?Suppose that there is a civil case against a defendant. The probability of the plaintiff winning is fixed at p=0. 5. The damages ar e given by V(Cp ,Cd)=6+6 ln(Cp +1)−6 ln(Cd +1). Find the optimal legal expenditur es under an English-style legal fee system. For what amount would the defendant agree to settle?
- Suppose that a large discount retailer with a lot of purchasingpower in a supply chain requires that all suppliers incorpo-rate a new information system that will reduce the cost of placing orders between the retailer and its suppliers as wellas between the suppliers and their suppliers. Suppose alsothat order quantities and lead times are related; the smallerthe order quantity the shorter the lead time from suppliers.Assume that all members of the supply chain use a continu-ous review system and EOQ order quantities. Explain the im-plications of the new information system for the supply chainin general and the inventory systems of the supply chainmembers in particularJiffy-Pol Consultants is paid $1,000,000 for each percentage of the vote that Senator Sleaze receives in the upcoming election. Sleaze’s share of the vote is determined by the number of slanderous campaign ads run by Jiffy-Pol according to the function S = 100N/(N + 1), where N is the number of ads. If each ad costs $4,900 approximately how many ads should Jiffy-Pol buy in order to maximize its profits? A) 2,853. B) 1428. C)98 D) 477.[Adverse Selection] Each of the two players receives an envelope, in which there is anamount of money that is equally distributed from $0, $1, $2, ..., $100. The amounts in twoenvelopes are independent. After receiving the envelope, each individual can check exactlyhow much money is put in his/her own envelope. Then each player has the option to exchangehis/her envelope for the other individual's prize. The decisions are made simultaneously. Ifboth individuals agree to exchange, then the envelopes are exchanged; otherwise, if at leastone player chooses not to exchange, each individual keeps his/her own envelope and receivesits attached sum of money.a. Model this game as a static Bayesian game (write the normal formrepresentation) and find the Bayesian Nash equilibrium.b. Consider a new game where the probability distribution of money in eachenvelope is changed. The amount is equal to $100 with probability 90%, and is equalto each number in $0, $1, $2, ... ,$99 with probability 0.1%.…
- urgent 1.15. Consider the Supreme Court as an electorate of 9 members thatvotes yes-or-no on a variety of issues. It is customary for this electorateto use the simple majority method, and since 9 is an odd number, no tiescan result when no justices are absent. Imagine the following alternativemethod for determining Supreme Court decisions. The decision is affirmative whenever at least 3 of the first 5 justices vote to affirm. Otherwisethe decision is negative. This is just the bloc voting method, where thejustices form blocs of size 5, 1, 1, 1, and 1. (This method emulates whatwould occur if the first 5 justices were to agree to always vote as a blocand to decide among themselves how the bloc should rule.)(a) Is this method anonymous?(b) Is this method neutral?(c) Is this method monotone?(d) If you were one of the 4 justices not among the first 5, why wouldyou complain about this voting method?Comment An HHI index of less than 1500 is considered as an competative market place , and If HHI index value is in range of 1500 to 2500 is considered as moderetly Concentrated.if the valuegoes above 2500 then the market place is highly Concentrated. So, In our All three years Value of HHI is above 2500 that shows in all three years that shows the there is very less competation in market or existence of very few players in all three years Are your conclusions in the HHI consistent with the five firm concentration in all cases? Give two reasons to support your answer(a) Is there an arbitrage? Suppose an investment firm sells options. (b) What is the t=0 price (premium) of a call option on stock 2 with exercise price E=12? (c) What is the t=0 price (premium) of a put option on stock 1 with exercise price E=23? Suppose a start-up company wants to go public. The firm has total costs of $100,000 at date t=1 and sales of $120,000 in state 1, $230,000 in state 2, and $140,000 in state 3. The firm wants to issue 1,000 IPO shares. (A share is endowed with a cash flow right of 0.1% of the total profits of the firm.) (d) The underwriter suggests an IPO price of $40 per share. Will this IPO be successful, i.e. will there be a positive demand for the shares?