Use the following information for questions
Suppose there is one depositor who earns an income of $100 in each period.She spends $50 for consumption and the remainder goes to her savings account.Assume that a bank doesn't do anything with this money except safeguards it.The bank charges $5 for safeguarding fee.
-There are five depositors with the same pattern of income and consumption as in the original problem, a fraction of them 0.4) will withdraw at t = 1.If the bank charges $5 for safeguarding fee and it costs $3 to monitor a merchant, what is the minimum number of merchants that the bank can lend to without exposing itself to withdrawal risk at t = 1?
A)zero
B)one
C)two
D)three
E)Four

Question

Use the following information for questions 
Suppose there is one depositor who earns an income of $100 in each period.She spends $50 for consumption and the remainder goes to her savings account.Assume that a bank doesn't do anything with this money except safeguards it.The bank charges $5 for safeguarding fee.
-There are five depositors with the same pattern of income and consumption as in the original problem, a fraction of them 0.4) will withdraw at t = 1.If the bank charges $5 for safeguarding fee and it costs $3 to monitor a merchant, what is the minimum number of merchants that the bank can lend to without exposing itself to withdrawal risk at t = 1?
A)zero
B)one
C)two
D)three
E)Four

Quizplus · Accepted Answer

The Answer is D

Use the Following Information for Questions