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A firm needs $100 investment for a project. Suppose there are only two projects in...

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A firm needs $100 investment for a project. Suppose there are only two projects in the economy. Also assume there are only two possible states of the economy in the next year, good state and bad state, each occurs with a 50% chance. The payoff to one project is $110 in the good state and $110 in the bad state, while the payoff to another project is $220 in the good state and $0 in the bad state. The bank manager knows the payoffs to the two projects but does not know which project the firm will invest in If the bank manager wants to make a loan to the firm and charge an interest of 10%, does the bank face an adverse selection problem? Select one: O a. Yes O b. No OC. Not enough information to determine

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