Suppose that, at time t=0 (now), 225 depositors (householders) deposit $1,000 each to a fictitious bank, call it OUR Bank. The deposits have one-year maturity and the bank pays 4% annual interest rate. The OUR Bank pools all the deposits, and lends $75,000 each to THREE corporations. The loan terms are following. Maturity =6 years, and Fixed interest rate is 8% per annum simple interest, it is the "Interest ONLY" loan for the first three-years of the maturity of loan, after that the principal amount needs to be repaid in three equal installments. In other words, the principal amount has to be repaid in three equal installments at the end of the Year 4, Year 5, and Year 6 of the loan maturity. (Remember, the interest is computed on the outstanding principal balance.) In addition, the owners have put $6,000 of initial equity capital. For exposition, we will make additional assumptions: No taxes, no dividend payments, no time value of money (bank will not reinvest the interest income). The OUR Bank will cease to exist after six years. Relax the first and second assumptions of Question 1. The third assumption remains the same. In other words, make the following assumptions: (1) Short-term (one-year) interest rate on deposits remains at 4% till the end of year 2, after that it increases to 7% per annum at the end of year 2, and it remains at that level till the end of year 6 . [Refinancing risk] (2) Two of the borrowers default on loan obligations, both principal and interest, in year 6 . The recovery rate is zero percent. (3) All depositors (225 depositors) renew their one-year deposits throughout the six years, but consume the interest payments. In other words, no principal withdrawals and no addition of principal from the depositors for the next six years. In addition, the OUR Bank MUST accept all the deposits from the 225 depositors for each of the six years, including Year 4, Year 5, and Year 6 . Assuming, no bailout or other equity infusion, what will be the amount received by each depositor at the end of year 6,t=6 year, for their deposit of $1,000 ? Also assume that all depositors will be treated equally in their recovery of deposits, in other words, no "first come first serve" policy of OUR Bank [For clarification: The bank issues loans only at t=0, after that, throughout the next six years, OUR bank is not issuing any additional loan or investing cash for short-term purpose. This clarification is required so that we all have a common correct answer.] [DO NOT FORGET THE INITIAL OWNER EQUITY]