A- Explain the idea of collateralized lending. Why do banks use it? What downside does it have and what solution have bankers found to the problem of under-collateralized loans? Explain "mark-to-market accounting"

B- Analyze the reaction of a bank giving collateralized loans to a fall in the price of collateralized assets and explain the effect of this action on the market prices of the implied assets. Does the bank action reinforce the initial price fall or counteract it? Compare with a similar price fall in the market for goods (Cooper, chapter 4); how does the baker react to a fall in the price of bread induced by a fall in demand?