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1.Consider the following problem with asymmetric information in the credit market. Suppose the lending interest rate (r1) is2%, and the borrowing interest rate (r2) is

1.Consider the following problem with asymmetric information in the credit market. Suppose the lending interest rate (r1) is2%, and the borrowing interest rate (r2) is 6.1%. What fraction of borrowers will default on their loans?

A.96.1%

B.5.9%

C.94.1%

D.3.9%

E.None of the above

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