3) Consider a Khas based financial institution run by Smart Guy. Smart Guy collects 50TL each, from 200 students, promising to pay back everyone on demand plus 10% interest. Smart Guy turns around and makes 4 one year loans of 2500 TL each. Each loan is charged 20% interest. Supposing everything goes smoothly for one year, what will be Smart Guys profit? Briefly explain.

4) Refer to Question III. Now suppose 6 months after the arrangement starts, 3 students face an emergency and ask for their money from Smart Guy. (i) How much money does Smart Guy need? (ii) Does this situation represent a problem for Smart Guy? (iii) What technical terms can be used to describe Smart Guys predicament? Briefly explain.