For a $$5,000$ loan over $6$ months, a bank's risk assessment

shows:

a$)60\%$ chance of full repayment with interest

b$)30\%$ chance of repaying $80\%$ of the total owed

c$)10\%$ chance of repaying only $20\%$ of the total owed

What interest rate should be charged to ensure a risk$-$

adjusted return of $1\mathrm{.}5\%?$

A bank is evaluating an $$8,000$ secured loan for $9$ months.

The risk model predicts:

a$)70\%$ chance of full repayment with interest

b$)20\%$ chance of repaying half the total owed plus

collateral

c$)10\%$ chance of no repayment, but the bank gets the

collateral

If the bank wants a risk$-$adjusted return of $3\%$ and the

collateral is worth $$2,000,$ what interest rate should be

charged?