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Suppose the market for loans is made up of 75% low default risk borrowers and 25%...

Suppose the market for loans is made up of 75% low default risk borrowers and 25% percent high default risk borrowers. A financial intermediary must collect a 3% interest rate on a low-risk loan and 9% interest rate on a high risk loan in order to be profitable. Assume the financial intermediary cannot verify whether a borrower is high-risk or low-risk. However, the intermediary knows that low-risk borrowers are willing to pay a 4% interest rate and high-risk borrowers are willing to pay a 10% interest rate. What is the minimum interest rate the intermediary will charge? (Please show step by step)

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