Intro An Investment costs $400 and offers a payoff of $500 with probability p and...
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Intro An Investment costs $400 and offers a payoff of $500 with probability p and O with probability 1-p. Time-equivalent Treasures offer an interest rate of 7%. Assume risk neutrality, l.e. the expected return on any security of the same time duration should be the same regardless of how risky the payoff is. Part 1 * Attempt 1/2 for 10 pts. What is the promised return of the investment? 3+ decimals Submit Part 2 Attempt 1/2 for 10 pts. What is the probability of default? 2+ decimals Submit
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