A business, seeking a loan of $1.75 million, is facing an equal probability of stagnation or rapid growth next year, earning either $2 million or $4 million in net income, respectively. If the current risk free interest rate is 4.5%, what promised interest rate must this business promise a lender to obtain the loan?

A bond, which costs $5000, will be paid back in full with 95% probability, and not at all with 5% probability. If the risk-free market rate is 4%, what is the appropriate promised bond yield in this perfect market?