I recently had an interview with OW and was given this case. Needless to say, I did not solve it adequately. Can anyone help...? :
You are a new investmend fund and raised a mere $100, and you want to focus on retail/consumer lending. You're objective is to get a 20% return on your initial $100 capital via lending. You know that 90% of your customer base will pay back the full amount + interest. While 10% of your customers will default on their loan and pay only 20% in interest. What interest price should you charge in order to guarantee a 20% return on your $100?
Any help would be truly appreciated!