Question

Suppose that Mr. Juice requests that Wonderland, from the previous problem, offer him an interest rate...

Suppose that Mr. Juice requests that Wonderland, from the previous problem, offer him an interest rate of 8.5%. To make this work, Juice promises to put up collateral worth $X. In order to make Wonderland willing, what does X need to be?

Group of answer choices

$1,656.05

$1,674.47

$1,689.99

$1,717.50

This is the previous question with the answer:

Suppose Mr. Juice needs a $5,500 loan and the bank, Wonderland Banking, has decided that this guy will repay with probability 0.89, and default otherwise. At a competitive interest rate, Wonderland will require a loan repayment of . Answer: $6179.78.

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