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A borrower requests a $150 loan from the bank. The borrower is type A with probability 0.35 and type B otherwise. Type A always repays
A borrower requests a $150 loan from the bank. The borrower is type A with probability 0.35 and type B otherwise. Type A always repays but type B only repays with probability 0.7. If the bank cannot observe the borrower's type, what is the competitive interest rate the bank can offer?
A) 24.3%
B) 27.5%
C) 31%
D) 33.3%
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