Question: 2 part question. Only question 2 needs to be answered, please 1. Suppose Mr. Juice needs a $5,500 loan and the bank, Wonderland Banking, has

2 part question. Only question 2 needs to be answered, please

1. Suppose Mr. Juice needs a $5,500 loan and the bank, Wonderland Banking, has decided that this guy will repay with probability 0.89, and default otherwise. At a competitive interest rate, Wonderland will require a loan repayment of $ ______.

2. Suppose that Mr. Juice requests that Wonderland, from the previous problem, offer him an interest rate of 8.5%. To make this work, Juice promises to put up collateral worth $X. In order to make Wonderland willing, what does X need to be?

A. 1,656.05

B. 1,674.47

C. 1,689.99

D. 1,717.50

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