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Consider two local banks. Bank A has 100 loans​ outstanding, each for​ $1.0 million, that it...

Consider two local banks. Bank A has 100 loans​ outstanding, each for​ $1.0 million, that it expects will be repaid today. Each loan has a 4 % probability of​ default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $ 100 million​ outstanding, which it also expects will be repaid today. It also has a 4 % probability of not being repaid. Calculate the​ following: a. The expected overall payoff of each bank. b. The standard deviation of the overall payoff of each bank.

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jeff jeffy answered 1 year ago
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