Question 13. Consider the model of demand deposits described in Chapter 13. Suppose N =...
60.1K
Verified Solution
Link Copied!
Question
Finance
Question 13. Consider the model of demand deposits described in Chapter 13. Suppose N = 900, y = 10, vk 0 = 0.9, and X = 1.2. Let each person have a two-thirds chance of being an Early type and a one-third chance of being a Late type. 1. What bank portfolio can guarantee the rate of return 1 to all early type people and the rate of return 1.2 to all Late type people? How many goods are placed in storage? In capital? 2. Now suppose the Late type people pretend to be Early type people and withdraw early. How many people can be paid before the bank runs out of assets? 3. Suppose that in the period after you made your deposit at the bank, you turn out to be a late type person and you learn that all of the other late type people are about to pretend to be early type people so that they can withdraw early. Is it in your self-interest to also try to withdraw early? 4. Are type late people better off than they would be if no late type person tried to withdraw early? Reconcile your answer with your answer to the previous
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
