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Question 428 Determinants of Interest Rates NewBank is a new bank that will only a 3-year bullet loan with all the principal and interest paid at the end of the term. The bank wants to receive an effective per annum interest rate of 6.15% before addition of any risk premiums. If 1% of the borrowers are expected to default with the bank able to only recover 25% from these borrowers, estimate the default risk premium the bank needs to include in its pricing. A) 0.002 B) 0.0065 C) 0.009 D) 0.0062 F 0027