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Please see below screenshot. I am confused on how it is 320%. A bank is planning to loan a startup $100 for 1 year. If
Please see below screenshot. I am confused on how it is 320%.
A bank is planning to loan a startup $100 for 1 year. If there is a 75% chance that the startup will not be able to pay back the money to the bank and a 25% chance that the startup will be able to pay back the money to the bank with interest. What interest rate does the bank need to charge on this loan in order to earn a 5% expected return? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a 320% Your answer b 160% c 162.5% d 165%Step by Step Solution
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