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Suppose that the Second United Bank has originated a portfolio of loans.The bank knows that the aggregate payoff on this portfolio call this portfolio S) will be $250 with probability 0.8 and $80 with probability 0.2.However, investors are unable to distinguish portfolio S from portfolio R.Portfolio R has an aggregate payoff of $250 with probability 0.6 and $80 with probability 0.4.Nevertheless, the investors believe that there is a 0.5 probability that the portfolio is S.The cost of communicating the true value of the portfolio is $18.If the bank keeps the portfolio on the books, its net profit is 3% of the true value minus a fixed cost of $2.50.The bank's net profit from origination and servicing is 2% of the value of the securitized portfolio.Everybody is risk-neutral.
-Given the answer in 21, should the bank securitize the portfolio with or without communication compare the net payoff?
A)With communication, since it is better off by $18.
B)With communication, since it is better off by $9.
C)With communication, since it is better off by $8.
D)Without communication, since it is better off by $1.
E)Without communication, since it is better off by $6.

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Use the following information for questions 
Suppose that the Second United Bank has originated a portfolio of loans.The bank knows that the aggregate payoff on this portfolio call this portfolio S) will be $250 with probability 0.8 and $80 with probability 0.2.However, investors are unable to distinguish portfolio S from portfolio R.Portfolio R has an aggregate payoff of $250 with probability 0.6 and $80 with probability 0.4.Nevertheless, the investors believe that there is a 0.5 probability that the portfolio is S.The cost of communicating the true value of the portfolio is $18.If the bank keeps the portfolio on the books, its net profit is 3% of the true value minus a fixed cost of $2.50.The bank's net profit from origination and servicing is 2% of the value of the securitized portfolio.Everybody is risk-neutral.
-Given the answer in 21, should the bank securitize the portfolio with or without communication compare the net payoff?
A)With communication, since it is better off by $18.
B)With communication, since it is better off by $9.
C)With communication, since it is better off by $8.
D)Without communication, since it is better off by $1.
E)Without communication, since it is better off by $6.

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The Answer of Use the following information for questions 
Suppose that the Second United Bank has originated a portfolio of loans.The bank knows that the aggregate payoff on this portfolio call this portfolio S) will be $250 with probability 0.8 and $80 with probability 0.2.However, investors are unable to distinguish portfolio S from portfolio R.Portfolio R has an aggregate payoff of $250 with probability 0.6 and $80 with probability 0.4.Nevertheless, the investors believe that there is a 0.5 probability that the portfolio is S.The cost of communicating the true value of the portfolio is $18.If the bank keeps the portfolio on the books, its net profit is 3% of the true value minus a fixed cost of $2.50.The bank's net profit from origination and servicing is 2% of the value of the securitized portfolio.Everybody is risk-neutral.
-Given the answer in 21, should the bank securitize the portfolio with or without communication compare the net payoff?
A)With communication, since it is better off by $18.
B)With communication, since it is better off by $9.
C)With communication, since it is better off by $8.
D)Without communication, since it is better off by $1.
E)Without communication, since it is better off by $6.

Use the Following Information for Questions