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crowdfunding

crowdfunding

 1. In terms of raising funds to conduct operations, or to start a business there are more choices today than there were even five years ago. A large part of this variety is due to the creation of “crowdfunding” platforms.  As is usually the case with Investopedia.com they offer a useful definition https://www.investopedia.com/terms/c/crowdfunding.asp    If have developed answers that rely on the work of others, you must cite them – citations do not have to be in “traditional style” but they should at least be a url that the instructor can find and check.

    1. Write a short two paragraph explanation of how crowdfunding works.
    2. In terms of Figure 1 of Section 2.1, in which part of the graph would you characterize “crowdfunding”.
    3. What are two of the main the advantages to the borrower of using a type of crowdfunding?
    4. What are two of the main the advantages to the lender of using a type of crowdfunding?
    5. How might the problem of adverse selectin arise in crowdfunding? Explain at least 1 instance that confronts either/or the lender and/or borrower.
    6. How might the problem of moral hazard arise in crowdfunding? Explain at least 1 instance that confronts either/or the lender and/or the borrower.

 

  1. In the data file ASSGN01.xlsx there is a data set very similar to the data set in the regression refresher lesson formerly called “Pre-Course Excel_Stats” of the course. In that lesson thee was sales data and price and income data for a number of years. Find this data in the tab “Prob2”.  The data is for the sales of powerd chess boards and has information on price and income.  Here the income is measured in 000.s of dollars, not dollars.  The first income number appears as 34.522 meaning $34,522.       Using this data do the following:
    1. Estimate the regression UnitsSold = B0 + B1*P + B2*Income. Write out your equation algebraically in the space provided below.  Hint:  The estimate of B0 is 2746.825. Use 2 or 3 decimal places not more and please consistently use that number of decimal places.
    2. Suppose that you are interested in forecasting sales during the first quarter of 2020 using the data available up until that point. Produce two separate estimates and show how the estimates are arrived at.
      1. The first estimate keeps price fixed at its 2019Q4 value and increases income by 3% from its 2019Q4 value.
      2. The second estimate keeps price fixed at its 2019Q4 value and decreases income by 3% from its 2019Q4 value.

 

  1. In the file ASSGN01.xlsx there is a tab called AltCurrency. In that tab you will find daily trading data on bitcoin, etherium, and Litecoin – three electronic currencies.  The data is daily (actually it is a 7 day average got each day) and the first date in the data is 8/17/16, The data ends on 5/29/22 meaning there are 2112 observations.
    1. In the text for chapter 03 there are functions of money listed. For each of the functions of money explain whether or not bitcoin fulfills that function and explain why.
    2. As you are aware there is some debate out there about what determines the value of these alternative currencies. Let’s forget for a moment about what determines the value of any or all of the 3 currencies in the data set.   I want to focus on the idea of whether or not the currencies tend to move together in price over time.   If my hypothesis is that the value of the three alternative currencies tend to move together in price I can gather data and do analysis to test this hypothesis.   One quick way to test this hypothesis would be to calculate the correlation coefficient between the pairs of alternative currencies.
      1. If I do so I find that the correlation between Bitcoin and Ehterium is _______.
      2. If I do so I find that the correlation between Bitcoin and Litecoin is _______.
  • If I do so I find that the correlation between Etherium and Litecoin is _______.
  1. If my hypothesis is correct, what would I expect to find about the correlation coefficients? Explain if they would be positive, negative, zero, and/or near 1 in absolute value.
  1. Again use the data in the file ASSGN01.xlsx in the tab called AltCurrency. Estimate the regression Litecoin = B0 + B1*Bitcoin.   Write out your estimate algebraically and include a screen shot of the excel output showing the coefficients.
  2. Answer the following: If I can buy a car today for $5,000 and it is worth $10,000 in extra income to me (net of expenses) because it enables me to get a job as a travelling salesman, should I take out a loan from Larry the Loan Shark at an 80% interest rate?  If Larry the Loan Shark (and he is a loan shark by the way) is my only borrowing activity?   Explain why or why not.  There are both economic and -non-economic components to this answer.

 

  1. Provide the following in terms of adverse selection.

 

  1. The text provides a definition of adverse selection; please find another definition and cite its source. Then explain it in layman’s terms.
  2. If I were a lender, such as a bank, name some ways or at least 1 way I am victimized by adverse selection.
  3. If I am a lender such as a bank, what steps could I take to reduce adverse selection?
  4. Using the logic of adverse selection explain why you are more likely, other things equal to lend to a family member or a very close friend rather than a stranger.
  5. Identify three main sources of transaction costs, as they relate to the US financial system. Explain, for each type of transaction cost you identify, what steps are taken to eliminate transaction costs.

 

 

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crowdfunding

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