# hw1 - Homework 1 ECON 4721H: Money and Banking, Fall 2011...

This preview shows pages 1–2. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Homework 1 ECON 4721H: Money and Banking, Fall 2011 Due Monday, September 19, at the beginning of class Problem 1. Mortgage Crisis (40pts) This problem asks you to write a short report (1 page) summarizing the recent nancial crisis and the recession. In your report, you have to answer clearly to the following questions; 1. Why did this current crisis happen? 2. How did the mortgage crisis turn into a nancial crisis? In addtion to my lecture notes, you should read the article, Deciphering the Liquidity and Credit Crunch 2007-08, by Markus K. Brunnermeier in NBER working paper series on my website before you start writing. Problem 2. Consumption-Based Asset Pricing Model (35pts) As in the class, assume the economy has two period, today and tomorrow. Tomorrow has two states, sunny ( S ) and rainy ( R ) , with probabilities, S + R = 1 . There are only an ice cream company and a rain boots company in the economy. And, their stocks have the following payo s; x 1 = ( x 1 ( S ) = 1 x 1 ( R ) = 0 x 2 = ( x 2 ( S ) = 0 x 2 ( R ) = 1 Consider a consumer in the economy (though there are many consumers in the economy). He isConsider a consumer in the economy (though there are many consumers in the economy)....
View Full Document

## This note was uploaded on 02/07/2012 for the course ECON 4721H taught by Professor Tanaka during the Fall '11 term at Minnesota.

### Page1 / 3

hw1 - Homework 1 ECON 4721H: Money and Banking, Fall 2011...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online