An investment costs $480 and offers a payoff of $600 with probability p and 0 with probability 1-p. Time-equivalent Trea

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answerhappygod
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An investment costs $480 and offers a payoff of $600 with probability p and 0 with probability 1-p. Time-equivalent Trea

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An investment costs $480 and offers a payoff of $600 with
probability p and 0 with probability 1-p. Time-equivalent
Treasuries offer an interest rate of 5%. Assume risk neutrality,
i.e. the expected return on any security of the same time duration
should be the same regardless of how risky the payoff is.
What is the probability of default.
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