Alice lends $200,000 for each new idea. Alice's history is that she selects low-risk projects or ideas that hit 50% of the time. What rate of return must each successful project pay Alice for her to break even?

A) 0%
B) 50%
C) 100%
D) 200%

Answer: C
Explanation: C) With Alice's rate of success, we know that one out of two projects are successful and that Alice is repaid the loan half of the time. Therefore, we must get enough funding from each successful project to cover two total projects. So if she makes two loans of $200,000 each, she needs to recover $400,000 from the successful project. Thus, each successful project must repay $400,000. Therefore, the loan "return" rate on each successful project must be: = 100%.