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Suppose a bank had lent Moe $50,000 at 8% for 1 year to fund a project (Project A) that will pay $60,000 with certainty

Economics

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Suppose a bank had lent Moe $50,000 at 8% for 1 year to fund a project (Project A) that will pay $60,000 with certainty. Having received the funds, Moe hears about another (risky) project (Project B) that pays $80,000 with 50% probability and $20,000 with 50% probability. Assume Moe is risk neutral, has pledged no collateral, has no net worth, and has no reputational capital to lose. (This means Moe will not be able to pay in full if he pursues Project B and it doesn't work out as hoped and has nothing else to lose if he defaults.) a. b. Which project, A or B, is more attractive to Moe now that Moe has received the funds from the bank? Briefly explain. What is the bank's expected return if Moe pursues Project B? Which project, A or B, is more attractive to Moe if he has a net worth of $100,000 rather than $0? Briefly explain. C.