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15. Regulators calculate that DLC bank (see Section 2.2) will report a profit that is normally distributed with a mean of $0.6 million and a standard deviation of $2 million. How much equity capital in addition to that in Table 2.2 should regulators require for there to be a 99.9 % chance of the capital not being wiped out by losses?

16. Explain the moral hazard problems with deposit insurance. How can they be overcome?

17. The bidders in a Dutch auction are as follows:

The number of shares being auctioned is 210,000. What is the price paid by investors? How many shares does each investor receive?

18. An investment bank has been asked to underwrite an issue of 10 million shares by a company. It is trying to decide between a firm commitment where it buys the shares for $10 per share and a best efforts where it charges a fee of 20 cents for each share sold. Explain the pros and cons of the two alternatives.