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A risk-free investment of $5000 will return 3%. A risky $5000 investment has a 23% chance...

A risk-free investment of $5000 will return 3%. A risky $5000 investment has a 23% chance of defaulting and returning only $3500. What default premium must the risky investment offer?                                

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Answer #1

Default premium = Risk-free rate + Default risk rarte (Here, Default risk rate = Default risk dollars / Investment value) Inv

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