. We discussed two leading reasons for the decline in the number of banks in the US. over the last ve decades. One of them is merger, what is the other one? (a) What are the main reasons for banks to merge? In particular, they are trying to overcome what costs through mergers? . Securitization is an important innovation for the nancial market. Please give two examples for the areas where the securitization process has happened. Explain the advantage and potential disadvantage for one (and only one) of the two examples you give. . In what sense is credit default swaps a tool for insurance? Discuss from the perspective of buyers of the CDS. . (Bonus credit) Suppose that a bond with a face value F pays a coupon C: for t = 1, . . . , M years, with M as its maturity. The coupon payments Ct follows a schedule of Ct = Omit1. Write out an equation and calculate the explicit value (i.e. getting rid of the . . .) for its price in a competitive asset market. (a) Now suppose there is another \"bond\" with innite years of payments 0; = (30th and no face value. In order for it to have a price (i.e. not an innitely large price), what minimal conditions do you have to impose on the interest rates and the parameter at? . Fees are an important way how banks can generate income. (a) First from the bank's perspective, why do banks want to collect fees on events such as bounced checks, or overdraft from checking accounts, apart from generating income? (b) You can imagine that depositors are not so happy with these fees. The 2010 Dodd-Frank Act creates a new Consumer Financial Protection Bureau (CFPB) within the Federal Reserve. The new agency will monitor credit card fees and interest rates. With the Great Recession in the backdrop, explain why the CFPB wants to step in and regulate the fees. (Hint: Connect to how the government regulates/deregulates the competition in the banking industry.)