Banking model with delegated monitoring

Assignment Help History
Reference no: EM132146863

Consider a banking model with delegated monitoring. Markets are perfectly competitive. There is a large number of borrowers who lack the funds and a large number of lenders who have the funds. Each lender has 10 goods to lend. Each borrower can invest in one project which requires 20 goods. The return of each project is risky, with probability 1/2, the project fails and yields nothing. The returns are independent across different projects (borrowers). However, the return is private information for the borrower. Other people have to incur a cost equivalent to 5 goods to monitor the outcome from investment.

a) Consider direct lending. Explain why each lender has to pay the monitoring cost when the borrower unable to repay loans. What is the monitoring cost for each project?

b) Under direct banking, what is the average gross rate of return for each lender? Explain

Reference no: EM132146863

Questions Cloud

Construct the industry supply curve and plot it on a graph : Construct the industry supply curve and plot it on a graph.
Define the issues engineering managers must consider : Research some of the issues engineering managers must consider when deciding on the best door hardware for the most cost-effective security for their facility.
Possible disadvantages of pay transparency : Describe two possible advantages and two possible disadvantages of pay transparency.
How can virtualization help verbania : The Discussion Board (DB) is part of the core of online learning. Classroom discussion in an online environment requires the active participation of students.
Banking model with delegated monitoring : Consider a banking model with delegated monitoring. Markets are perfectly competitive. There is a large number of borrowers who lack the funds and a large
Sexual harassment affect workplace relationship : How does sexual harassment affect workplace relationship?
How the team successfully collaborated : Compose a high-level summary of the Systems Implementation Plan that you are presenting to Verbania. The purpose of this section is to provide your client.
How can distributive bargaining be used in this instance : Discuss one instance where you have been involved in distributed bargaining. What was the outcome?
What is the expected value of arbitration for trout : What is the expected value of arbitration for Trout? What is the expected value (loss) of arbitration for the Angels?

Reviews

Write a Review

History Questions & Answers

  History of imperialism and colonialism

Discuss the specific connections between economic development and imperialism in the latter half of the 20th century.

  Explain immigration to america

Explain immigration to America during the half of 19 th century

  American society in the making

American Society in the Making

  Conditions of late 19th century worker

Some historians considered the industrialists of the late 19th Century to be captains of industry while others considered them robber barons. Which view do you believe to be correct and why.

  Explaining the transition of humankind

Explain the significance of the transition of humankind from a hunter-gatherer society to a food-producing society. Include the following: A description of the Paleolithic era

  Tombs and monuments

Tombs and Monuments: Compare an aspect of the tomb of Emperor Shihuangdi with the burial tombs of other cultures, such as Egypt or Mesopotamia. Explain whether you think the emperor's elaborate tomb was motivated by power or religious beliefs.

  Accomplishments of egyptian female

Can anyone educate me regarding one distinct Mesopatamian and one Egyptian female and their accomplishments?

  Describing the characteristics of mesopotamia

What are the characteristics of the first civilizations of 5000 years ago? Especially in Mesopotamia.

  Explaining the vulnerability of mesopotamia

Determine why Mesopotamia was so vulnerable.

  Difference between egypt and mesopotamia

Some have said that the strength and endurance of the Empire and the regular, dependable recurrence of the Nile flood gave the artists-craftsmen a sense of consistency that profoundly influenced the nature of their artistic creations.

  Characteristics of first civilizations

What are the characteristics of the first civilizations of 5000 years ago( especially in the Mesopotamia)? what makes these groups "civilized" as opposed to prehistoric peoples?

  Growth and change in society

Cultures of Mesopotamia, especially Summer, and Egypt. How cultures change over time.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd