9) Suppose a risk-neutral entrepreneur has a one-year project that involves an initial investment of $20,000. There is a probability of 3/4 the project will have a return of $30,000 in one year (good outcome) and a probability of 1/4 that the project will have a return of $6000 (bad outcome). a) Suppose the entrepreneur has $20,000 of his own money to invest in the project. He can choose between investing in the project and leaving the money in the bank to earn interest at rate s for one year. How high would the interest rate have to be for him to choose to keep the money in the bank? (i.e., when would the expected return from the project equal the expected return from the bank account? This is where the expected utility from investing is equal to the expected utility of not investing for a riskneutral person.) b) Suppose the entrepreneur can borrow $20,000 from the bank at an interest rate r for one year.He can declare bankruptcy if he does not earn enough from the investment to pay back the bank (i.e., if the "bad outcome" occurs). Assume that if he declares bankruptcy and defaults, he only pays back the $6000 that the project earns in the bad outcome. What is the highest interest rate at which he is willing to borrow from the bank? HINT: First calculate the expected return from the project and subtract from that the expected repayment to the bank. This gives us the expected utility of investing. Then apply the methods from part a. c) Re-do part b, but instead assume that if he declares bankruptcy and defaults, he pays nothing back to the bank in case of the bad outcome. d) Why do you think your answers to a), b), and c) are the same or different