What is the minimum continuously compounded interest rate


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?

Request for Solution File

Ask an Expert for Answer!!
Financial Management: What is the minimum continuously compounded interest rate
Reference No:- TGS02318831

Expected delivery within 24 Hours