Suppose an agent has $100. He opens a demand deposit of $100 with a bank which has asset x where x is a random variable. a) Suppose x is uniformly distributed on the interval [100, 200]. The density of x is f(x)=1/100 on [100,200] and f(x)=0 otherwise. What is the expect
Suppose an agent has $100. He opens a demand deposit of $100 with a bank which has asset x where x is a random variable.
a) Suppose x is uniformly distributed on the interval [100, 200]. The density of x is f(x)=1/100 on [100,200] and f(x)=0 otherwise. What is the expected loss of the depositor?
b) Suppose changes in the economy changes the distribution of x. Now x is uniformly distributed on the interval [40, 200]. The density of x is f(x)=1/160 on [40, 200] and f(x)=0 otherwise. What is the expected loss of the depositor?
c) Suppose x is uniformly distributed on the interval [0, 200]. The density of x is f(x)=1/200 on [0, 200] and f(x)=0 otherwise. Calculate the expected loss of the depositor.
d) Suppose x is uniformly distributed on the interval [0, 200]. Given the macroeconomic environment, the government introduces deposit insurance. There is deposit insurance of an amount I=80. Calculate the expected loss of the depositor.
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a.
X is uniformly distributed on the interval [100, 200].
He opens a demand deposit of $100 with a bank.
The expected loss of the depositor is,
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