An entrepreneur with initial wealth 1 - I dollars has a new project in which to invest. To com plete the project the entrepreneur needs additional i dollars that they can borrow from a bank. If they borrow l dollars, they invest the 1 euro in the project. With probability p the project succeeds and brings it > 1 dollars and with probability 1 - p it fails and brings 0.11\" the entrepreneur does not borrow the money they keep the l l dollars (outside option). There are two types of entrepreneurs : those who have good projects with a high probability of success p = pH and those who have bad projects with a lower probability of success p = pt I. How can we interpret this assumption? (b) What is the expected payoff ofan entrepreneur oi tupe j = L. H if they borrow at rate 1' ? Show that a type L will borrow if and only if i i t.- (c) What are the bank's updated beliefs about the entrepreneur's type if a loan is taken at i > EL? At i