Help me to do the problem set without word and page limit.

3. Cull and Morduch (2017) argue (around page 17) that "Despite the high interest rates, and despite the finding that most firms earn positive accounting profits, only a minority earn eco- nomic profit (which accounts fully for the opportunity costs of inputs). The authors rely on a study by Cull, et al. (2017) which calculates economic profits for over 1,000 microfinance institutions. You can access this latter article here: https://academic-oup-com.us1. proxy.openathens.net/wber/article/32/2/221/4971668?searchresult=1.

In this question, we are going to look at accounting and economic profits of one institu- tion, Grameen Bank of Bangladesh, following the Cull, et al. (2017) method. We'll rely primarily on the MIX Market database (https://databank.worldbank.org/source/ mix-market), which contains a lot of useful accounting information on individual MFIs.

(a) To start with, use the MIX database to find operating profit of the MFI for the most recent year available. Does it generate accounting profits?

(b) There are essentially two adjustments that Cull, et al. (2017) propose to accounting profits. First, they argue that microfinance institutions may receive subsidies on the loans that they get from banks (these are called 'soft loans'). To calculate this subsidy for Grameen, first compute the interest rate on borrowings (interest expense on borrow- ings divided by borrowing). Compare this with a measure of the market lending rate- you can get this from World Development Indicators, https://data.worldbank. org/.

(c) Now, back out the subsidy by subtracting the actual interest paid from the interest Grameen would have paid if it borrowed at the market rate.

(d) The second adjustment is based on donated capital. Note that if capital is donated, then Grameen doesn't pay interest on it, and therefore doesn't pay its opportunity cost. How much donated equity does Grameen have?

(e) What would Grameen get in interest if it loaned this equity at the market rate?

(f) After accounting for these two implicit subsidies, does Grameen make an economic profit?