Assume you have $50,000 and you are willing to invest. You have two choices:

a) A safe investment that promises to pay 8% profit after 1 year.

b) A risky investment that has a 20% chance you might loseallyour money and 80% chance you might receive X amount of money.

1) How much do you expect to get paid for a year in the second investment to be indifferent between two investment choices? (the two investments have the same Expected Profit)

2) What is the Risk Premium in the second choices?