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Suppose that the Third United Bank has originated a portfolio of loans.The bank knows that the aggregate payoff on this portfolio call this portfolio S will be $1,000 with probability 0.7 and $400 with probability 0.3.However, investors are unable to distinguish portfolio S from portfolio R.Portfolio R has an aggregate payoff of $1,000 with probability 0.5 and $400 with probability 0.5.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 $75.If the bank keeps the portfolio on the books, its net profit is 7% of the true value minus a fixed cost of
$25.The bank's net profit from origination and servicing is 4% of the value of the securitized portfolio.Everybody is risk-neutral.
-What is the bank's net profit from securitization without communication?
A)$56.00
B)$45.64
C)$40.88
D)$32.40
E)$30.40

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Use the following information for questions 
Suppose that the Third United Bank has originated a portfolio of loans.The bank knows that the aggregate payoff on this portfolio call this portfolio S will be $1,000 with probability 0.7 and $400 with probability 0.3.However, investors are unable to distinguish portfolio S from portfolio R.Portfolio R has an aggregate payoff of $1,000 with probability 0.5 and $400 with probability 0.5.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 $75.If the bank keeps the portfolio on the books, its net profit is 7% of the true value minus a fixed cost of
$25.The bank's net profit from origination and servicing is 4% of the value of the securitized portfolio.Everybody is risk-neutral.
-What is the bank's net profit from securitization without communication?
A)$56.00
B)$45.64
C)$40.88
D)$32.40
E)$30.40

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The Answer of Use the following information for questions 
Suppose that the Third United Bank has originated a portfolio of loans.The bank knows that the aggregate payoff on this portfolio call this portfolio S will be $1,000 with probability 0.7 and $400 with probability 0.3.However, investors are unable to distinguish portfolio S from portfolio R.Portfolio R has an aggregate payoff of $1,000 with probability 0.5 and $400 with probability 0.5.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 $75.If the bank keeps the portfolio on the books, its net profit is 7% of the true value minus a fixed cost of
$25.The bank's net profit from origination and servicing is 4% of the value of the securitized portfolio.Everybody is risk-neutral.
-What is the bank's net profit from securitization without communication?
A)$56.00
B)$45.64
C)$40.88
D)$32.40
E)$30.40

Use the Following Information for Questions