A bank faces a pool of high and low risk borrowers with measure one in two successive periods. In each period, each borrower wishes to borrow 1 from the bank. A low-risk borrower's project returns G = 2 with probability P = 0.8 and high-risk borrower's project yields B = 3 with probability P = 0.2 in each period. If a project is unsuccessful, it yields zero. The bank knows that the proportion of low-risk borrowers is y = 0.5. However, the bank is unable to distinguish between low and high-risk borrowers, i.e. it doesn't have an appropriate screening technology.Consider a bank which operates as a monopoly and wants to attract both types of borrowers in the first period.What's the repayment R) that the bank will charge in the first period? Compute the bank's first period profit (1)Calculate the posterior probabilities of a borrower being low risk given that the project was successful and also when theproject failed after the first period (i.e. Pr(GIS), Pr(GIF), respectively).How much will the bank charge to successful and failed borrowers in the second period (R, R)? Calculate the bank's second period profit (2). What's the total profit across the two periods ((1) (2))?a)Describe the process of securitization.Question 2b)What benefits does mortgage securitization have for borrowers, issuers and investors? Also, discuss the factors that limit securitization in general.c) Discuss Basel II in detail and contrast its main features with those of Basel I.d) Why are banks regulated in general? What's the rationale behind capital regulation? Discuss Basel I.