Capital Markets and Financial Institutions – How to Survive Them, week (1-6) All Quiz with Assignment.

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 Capital Markets and Financial Institutions – How to Survive Them






PROMPT

A. Analyzing Investor’s Preferences

ON CALCULATING THE UTILITIES OF "BLACK BOX" AND THE "RED TRIANGLE", WE GOT TO KNOW THE RATIONAL INVESTORS WILL PREFER "RED TRIANGLE " AS IT IS LIQUID AND YIELD MORE THAN THE "BLACK BOX" THAT IS BY $3.5 EACH.


PROMPT

B. Analyzing the Bank’s Ability to Create Liquidity

BANK WILL BE ABLE TO CREATE LIQUIDITY SINCE BEING TAKEN INTO COMPARISON OF BOTH CASES, BANK WILL BE ABLE TO GET PROFITS OF $6. WHICH MEANS LIQUIDITY IS MORE



PROMPT

C. Calculating the Bank’s Profit and Improving Asset Terms

ON COMPARISON, THE PROFIT ARISE TO BE POSITIVE AND THE BANK SHOULD OFFER "RED TRIANGLE" TO BE HOLDER FOR PAYMENT AT, T=2 WITH RETURN OF $1.81. THE MAXIMUM AMOUNT BANK CAN OFFER AT T=1 IS $1.6



PROMPT

D. Conclusions

THE BANK DOESN'T HAVE A LOT OF FREEDOM IN LIQUIDITY CREATION AS THE OPTIONS FOR THE SAME ARE LIMITED. OR DEPOSITORS, YES BUT THE RISK WILL BE HIGH. EARLY WITHDRAWALS WILL BE SENSITIVE AS IT WILL HAMPER THE LIQUIDITY OF THE BANK.







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