Question 3 In a credit market any borrower needs to borrow one unit of capital to invest in its project. Any project results in one of the two outcomes: success (return $2500), or failure (return $0). There are two types of borrowers: type s (safe) and type r (risky). The probability of success is 1/4 for type s and 1/8 for type r. Loans are given to groups of two borrowers through the joint liability contract (630, 480), where 630 is the individual liability component and 480 is the joint liability component. Denote by yab the average net income of a borrower whose own type is a and whose group partner is of type b. (a) Showing all steps of your work, determine ysr, yrs, yss, yrr. (b) Suppose there are four borrowers: two of type s, two of type r. Show that same types forming groups is a stable formation.