1) (25 points) One of the reasons why we have financial intermediaries is because of asymmetric information problems. In this exercise we will illustrate how the presence of asymmetric information can create market failures. Suppose that you save $1 that you would like to lend. You are willing to lend provided you get at least $1 back in expected value. There are two projects that need funding project_A and project_B. If project_B gets $1 of funding, this project will earn $1.15 with certainty and it pays you back 1+r. If project_A gets funding, with probability 0.5 the project will succeed and it earns $1.8 and it pays you back 1+r; if the project fails it earns nothing and you lose the $1 of funding. Project_A and project_B will take a loan if the r is such that their expected profit is non-negative