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Q4 Moral hazard in credit markets 6 Points A competitive lender makes loans to a pool of borrowers that are identical. After borrowers have received their loans they choose one of two investment projects. Project G pays the borrower a rate of return of r, with probability p,- With probability 1 - Pg. Project G pays a rate of return of -1, the borrower defaults on the loon, and the lender receives nothing. Project B pays the borrower a rate of return of ry with probability p; And with probability 1 - Po. Project B pays a rate of return of -1, the borrower defaults on the loan, and the lender receives nothing. We assume as usual that ro p. and p,(1 +r,) > po(1 + m). Supposery = 0.10, r. = 0.12, p, = 0.98, pp = 0.4, rp = 0.02, L = 1. The lender can't distinguish between borrower types and so it charges all borrowers the same interest rate my. The lender lends an amount _ and pays interest ro on funds acquired from depositors. Round your answer to at least three decimal places.Q4.1 3 Points Compute the value for y; such that the borrower is indifferent between projects G and B. Round your answer to at least three decimal places. Enter your answer here Save AnswerQ4.2 3 Points Suppose that ry = 0.15. Compute the collateral to loan ratio c; that ensures that the borrower is indifferent between the projects G and B. Round your answer to at least three decimal places. Enter your answer here Save