Use the Following Information for Problems

Use the following information for problems
There are two types of borrower, L low risk and H high risk. The bank can distinguish the types but cannot control the borrower’s project choice. The borrower has a choice of two mutually exclusive projects: S safe and R risky. The project requires $250 investment. For borrower L, project S can generate $315 for sure; while project R generates $320 with probability 0.8 and zero with probability 0.2. For borrower H, project S can generate $320 with probability 0.8 and zero with probability 0.2; while project R generates $337 with probability 0.6 and zero with probability 0.4. The riskless interest rate is 6%, and the bank thinks that it can charge an additional 1.5% before a customer switches to another bank.

-What is the net expected payoff to L if S is chosen?

A) $315.00
B) $65.00
C) $60.47
D) $46.25
E) 0