(Rate with LGD, risk-averse lender) Assume a bank can invest in a government bonds at a risk-free rate of 3.5%. Alternatively, it can invest in a corporate bond with a default probability of 4%. If the issuer defaults, the bank expects to lose 73.1% of the investment. A risk-averse bank that requires an additional premium of 2.5% as a result of risk aversion would be indifferent between investing in the government bond and the corporate bond if the corporate bond offers a rate or 0 %. Round to the nearest 0.01%, drop the % symbol. E.g., if your answer is 0.10245 or 10.245%, record it as 10.25. Answer Key:9.3

The answer is 9.3, please show the work to get that answer. If its not 9.3, do not type it into the answer box.