You manage
a loan portfolio at a local bank. One day you are approached by a Jim Riskind
who is seeking an unsecured loan of $10000 for a period of 1 year. Upon
checking his credit score you observe that it is 655. Your data indicates that
this score is associated with a 5% probability of default.If the bank wants to earn an 8% rate of return
on its money on average what must be the interest rate that you quote to Jim
on this loan? Assume that in case of default you lose the entire loan amount.(Enter answer in percents accurate to 2
decimal places.)