What is the minimum continuously compounded interest rate

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Finance (Investment Mathematics):

An investor's required real rate of return is 3% continuously compounded. The continuously compounded inflation rate for the next 2 years is known to

be 2%. The investor makes a 2 year loan that has 10% probability of default, with an expected recovery of 25% in the event of default.

What is the minimum continuously compounded interest rate that could be acceptable to this investor for this loan?

Reference no: EM131521867

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