1. Consider a bank which operates as a monopoly and wants to attract both types of borrowers in the first period. a. What is the repayment R(1) that the bank will charge in the first period? Compute the bank's first period profit 7 (1) ) b. Calculate the posterior probabilities of a borrower being low risk given that the project was successful and also when the project failed after the first period (i.e. Pr(G|S),Pr(G|F), respectively). (2) (2) c. What repayments RS", R will the bank charge to successful and failed borrowers, respectively, in the second period? Calculate the bank's second period profit 7 (2). What is the total profit across the two periods (5 (1) +7 (2)) ? 1. Consider a bank which operates as a monopoly and wants to attract both types of borrowers in the first period. a. What is the repayment R(1) that the bank will charge in the first period? Compute the bank's first period profit 7 (1) ) b. Calculate the posterior probabilities of a borrower being low risk given that the project was successful and also when the project failed after the first period (i.e. Pr(G|S),Pr(G|F), respectively). (2) (2) c. What repayments RS", R will the bank charge to successful and failed borrowers, respectively, in the second period? Calculate the bank's second period profit 7 (2). What is the total profit across the two periods (5 (1) +7 (2))