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.two types of the borrower: risk (R) safe(S) . both want a loan of size L . lender's cost of funds (r) which 10% .

.two types of the borrower: risk (R) safe(S)

. both want a loan of size L

. lender's cost of funds (r) which 10%

. the lender charged an interest rate(i) which is 40%

. what is the probability (p) of loan repayment, that the lender assumed?

a. 0.50

b. 0.90

c. 0.855

d. 0.785

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