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.
-If the bank assumes that R will be chosen by H, what interest rate should the bank charge?

Question

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.
-If the bank assumes that R will be chosen by H, what interest rate should the bank charge?

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The Answer of 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.
-If the bank assumes that R will be chosen by H, what interest rate should the bank charge?

Use the Following Information for Problems