Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. consider two local banks. bank a has 88 loans outs

Consider two local banks. Bank A has 88 loans outstanding, each for $1.0 million, that...

90.2K

Verified Solution

Question

Finance

image

Consider two local banks. Bank A has 88 loans outstanding, each for $1.0 million, that it expects will be repaid today. Each loan has a 5% 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 $88 million outstanding, which it also expects will be repaid today. It also has a 5% 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

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students