Imagine a Nursery takes out a $400,000 loan for a greenhouse. After making installment payments...
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Accounting
Imagine a Nursery takes out a $400,000 loan for a greenhouse. After making installment payments on the loan for a few years, the borrower faces financial difficulties and defaults when the loan has an outstanding balance, or exposure at default, of $300,000. the bank forecloses on the Greenhouse and is able to sell it for $240,000.
(Expected loss=loss-given default x probability of default x Exposure at default)
Q1: what is the LGD(; loss given default) and expected loss?
Q2: If this is a potential and not a certain loss. what are the possible rates for Expected Losses?
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