A us treasury security is paying an interest rate of 118, Ask an Expert

Economics

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?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91719141

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