Treasury security is paying an interest rate

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A US Treasury Security is paying an interest rate of 1.18 percent for a 1 year zero coupon bond. The country of Benin is also giving a 1 year zero coupon bond. There is a probability of 0.05 that Benin will default and pay you back nothing (r=-1). Otherwise they will pay you back with the interest you agreed to. If you are a risk averse person, how much does the interest rate the government of Benin have to pay you in order for you to consider purchasing their bond?

Reference no: EM131003392

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