Below is the payoff table of a company. The expected rate of return on 1-year Treasuries is 5% and the world is risk-neutral.

Next Years Payoffs Probability $1000 80% $500 20%

1) What is the promised rate of return for the company (without loans) ?

2) If the company is financed with $600 by issuing its bonds today, what are the promised rate of returns for bond investors and levered equity investors ?

3) Which investment is the safest among fully owned, bond, and levered equity