Question: Debt and information sensitivity Payoff s(x) D Debt payoff Value of debt Figure 1 x Value of collateral Information Sensitive region Information insensitive region

Debt and information sensitivity Payoff s(x) D Debt payoff Value of debt

Debt and information sensitivity Payoff s(x) D Debt payoff Value of debt Figure 1 x Value of collateral Information Sensitive region Information insensitive region 25 2. Consider the following entry in Thompson's Bank Note Reporter: City Bank, New-York, (S.) [G. A. Worth. Pres., Robert Strong, Cash.] 2's, dated Feb. 20, 1827, lett. G. signed G. A. Worth, Cash., Isaac Wright, Pres. Otbers, lett. K. 3's, letts B. b. In German text, pay to E. Hall, dated Oct. 1, 1838, No. 466, signed G. A. Worth Cash., Daniel Wright, Pres. Paper white and very thin. Engraved by Draper, Underwood, Bald & Spencer. par The entry describes the bank notes issued by City Bank of New York. It says that genuine notes circulate at par. Were they a good medium of exchange-that is, did they function as money? Explain, referring to the graph in question 1.

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