Reference no: EM133109557
Question - Assume that there is a newly opened bank. The first business of the bank is a 1-year loan for a start-up company of $2 million (M). To get the money ready for this loan, the bank offers a 20% interest rate to attract people to deposit in the bank.
There are two clients (Client 1 and Client 2) with $1M. They can decide whether to deposit all the money in the bank or not. The bank can proceed to the loan business only if both clients agree to deposit in the bank.
If one or both clients don't deposit at the beginning, both clients keep their balance of $1M. If both clients agree to deposit, the bank can lend the money to the company. Both clients can get their principals and interests (i.e., in total it is $1.2 M) if both clients withdraw after 1 year (i.e. Withdraw after the due date of the loan, a.k.a. due withdrawal). However, if any client requires to get back the money in less than 1 year (i.e. early withdrawal), the bank must cease the loan. But only 80% of the loan amount can be returned. For this 80% of the loan amount, if only one client requires to get back the money in less than 1 year, he/she can get back the full deposit. The remaining amount will be given to the other client. If both clients require to get back the money in less than 1 year, then each client can only get the equal amount from 80% of the loan amount.
(a) Assume that the actions of both clients are unobservable to each other. According to the context, interpret the interaction as a game of two clients (Client 1 and Client 2).
(b) Analyse the pure strategy equilibrium and discuss the implication of the model in reality.
|
Prepare a journal entry to record the capital reduction
: A total of RM13,200 accounts receivable could not be collected. Prepare a journal entry to record the above capital reduction
|
|
Research about mcdonald case
: After little more research about McDonald case. Do you believe that this is demonstrating that the company was aware of nature and extent of this hazard ...?
|
|
What is the current 3-year spot rate
: It is expected that in exactly three years, a 12-month pure discount bond with a face value of $5,000 will sell for $4,900. If 4-year spot (zero) rates are 3.00
|
|
Leadership is influence relationship among leaders
: Leadership is an influence relationship among leaders and followers who intend real changes that reflect their mutual purposes.
|
|
Interpret the interaction as a game of two clients
: Assume that the actions of both clients are unobservable to each other. According to the context, interpret the interaction as a game of two clients
|
|
Issues affecting organizations
: There are many issues affecting organizations today, such as employee retention, flexible work schedule, contingent workforce, talent management,
|
|
What is the effect on profits of accepting the offer
: Hi-Performance incurs $5 million of fixed costs each year. What is the effect on profits of accepting the offer from Additives-R-Us
|
|
Business-level strategies
: The five business-level strategies are cost leadership, differentiation, focused cost leadership, focused differentiation, and the integrated cost leadership
|
|
Communication model
: Describe in detail the basic communication model including where the initial message may be changed or distorted.
|