My theory (spoilers)
Just watched this for the first time last night and while I initially didn't really like it, after thinking about it I'm starting to appreciate the intricate plot a bit more.
It seemed to me like the whole thing was an (extrememly) elaborate test for Mike to get his redbelt, hence the professor being there and giving it to him in the ring, and remembering the part near the beginning when the cop wanted to take his black belt test and it was sprung on him. That's my interpretation, although I would imagine the cop commiting suicide wasn't part of their plan, but Mike stressed that you never know what's going to happen.