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Manning Bank recently disbursed a $2 million loan, of which $1.6 million is currently outstanding. The...

Manning Bank recently disbursed a $2 million loan, of which $1.6 million is currently outstanding. The probability of default over the next year is 1%, and the recovery rate is 70%. The standard deviation of loss given default (LGD) is 20%. The expected and unexpected losses (standard deviation) for the bank are

a. Expected loss = $4,800; unexpected loss = $57,489

b. Expected loss = $11,200; unexpected loss = $57,489

c. Expected loss = $4,800; unexpected loss = $115,942

d. Expected loss = $11,200; unexpected loss = $115,942

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ekkarill92 answered 1 year ago
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