Mr. Hill wishes to borrow 5000. He will repay the loan with a single payment at the

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Mr. Hill wishes to borrow 5000. He will repay the loan with a single payment at the end of one year. The lending agency has a

"risk-free" rate of interest of 13%, but estimates there is an 8%

chance that Mr. Hill will not repay the loan. How much should they ask Mr. Hill to repay?

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