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An entrepreneur is quoted a borrowing rate of 1 2 % at the local bank, while the bank pays depositors 6 % per annum. a

An entrepreneur is quoted a borrowing rate of 12% at the local bank,
while the bank pays depositors 6% per annum.
a. If in bankruptcy the entrepreneur will not pay back anything, but
otherwise everything will be repaid, then under risk neutrality what
does the bank believe the probability of failure to be?
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