What is the competitive interest rate the bank can offer

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Reference no: EM131599833

A borrower requests a $150 loan from the bank. The borrower is type A with probability 0.35 and type B otherwise. Type A always repays but type B only repays with probability 0.7. If the bank cannot observe the borrower's type, what is the competitive interest rate the bank can offer?

A) 24.3%

B) 27.5%

C) 31%

D) 33.3%

Reference no: EM131599833

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