Suppose a bank can make a loan of $120 at t = 0. The loan will repay at t = 1 and it fi nances a project that a borrower can invest in. The borrower can choose from one of the three mutually exclusive projects: G, N, and n, each of which requires an initial investment of $120 at t = 0 and produces a random payoff at t = 1. Project G pays off $200 w.p. 0.8 and zero w.p. 0.2. Projects N and n both yield $200 w.p. 0.5 and zero w.p. 0.5. Project N produces a noncontractible private