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Advanced Financial TheorySeminar 1

Group 208-D

Group Members

Navarat Temsumrit Tian Wang Wenjin Weng Shuai Yuan Hanlu Zhang

Question1.Assume there are two investors in an economy with productive opportunity and financial markets If the investors have different MRS,

how they maximise their utility? Use graph to illustrate.

Group A B C

Band 4.5 4 3

Group A

Briefly introduced the movement, however, lack of explanation.

Group B

Wrong graph?????

Group C

Fail to illustrate using graph.

Lack of detailed explanation.

Graphically analyze the effect of an exogenous decrease in the interest rate on borrowers and lenders, (b) the present wealth of borrowers and lenders.

Group A B C

Band 5 4.5 4

Group AClear explanation. It should be better if you could distinguish new CML from the old one.

Group B

Clear graph, but fail to illustrate why W0 to W0*. Could explain more about why CML becomes flatter?

Group CGood explanation on the effect, however, failed to mention the change of Wealth.

If there are transaction costs charged by financial intermediaries and marketplaces for their provided services, the borrowing rate becomes greater or smaller than the lending rate, what’s the implication on Fisher Separation Principle? Use graph to illustrate.

Group A B C

Band 4.5 4.5 3

Group AGood explanation, clear conclusion.The graph could be improved by distinguishing lending rate and borrowing rate line.

Group BThe graph is almost correct, however not clearly enough.

Group C

Where is the graph??