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. How much must the risky investment promise to return?

14.8%

13.0%

11.5%

12.9%

Expert Solution

12.9%

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 1 month ago

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