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Consider a risk - neutral investor which is faced with the following two investments for their $ 1 , 0 0 0 : - a
Consider a riskneutral investor which is faced with the following two investments for their $:
a riskless or riskfree bond paying a interest rate i
A risky bond, which may pay back with probability and not pay with probability
What is the risk premium x that the risky bond should pay?
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