Explain the type of conflicts of interest that can arise from the development of universal banking
What will be an ideal response?
There are five main conflicts of interest:
1. The underwriting department would benefit from aggressive sales of a security to the customers of a bank where the customers would benefit from unbiased advice.
2. A bank manager may try to hard-sell an issuing firm's securities to the disadvantage of the bank customer or limit losses of an underperforming IPO to the bank's trust accounts.
3. A bank may push a bond issue of a firm with a high default risk to pay off a loan the bank has with the firm.
4. May grant favorable loan conditions to a firm in return for fees to perform underwriting activities.
5. May try to hard-sell the bank's insurance to its customers.
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Refer to the following payoff matrix:Player 1Player 2??Low QHigh Q?Low Q$10,$35$25,$30?High Q$30,$7$20,$6Suppose the production game depicted in the payoff matrix is a sequential-move game. Identify the strategy leading to a first-mover advantage for player 2.
A. Player 2 moves first and plays High Q. Observing player 2's move, player 1's best response is to play Low Q. B. Player 2 moves first and plays High Q. Observing player 2's move, player 1's best response is to play High Q. C. Player 2 moves first and plays Low Q. Observing player 2's move, player 1's best response is to play Low Q. D. Player 2 moves first and plays Low Q. Observing player 2's move, player 1's best response is to play High Q.
A government wants to reduce electricity consumption by 5%. The price elasticity of demand for electricity is -0.5. The government must ________ the price of electricity by ________.
A. raise; 1.0% B. raise; 0.1% C. lower; 0.5% D. raise; 10.0%