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13. Suppose that an FI holds two loans with the following characteristics. Annual Spread between Loan Rate and FI's cost of funds Loan 1 2 Xi ? ? 6% 4% A. X1 = 50%, X2 = 50% B. X1 = 40%, X2 = 60% C. X1 = 30%, X2 = 70% D. X1 = 20%, X2 = 80% E. X1 = 10%, X2 = 90% Annual Fees 2% 1% Loss to FI Given Default 40% 30% Expected Default Frequency 2.50% 1.50% Correlation -0.1 Using Moody's Analytics Portfolio Manager model, what portfolio weights do you want to put on the two loans in order to make the portfolio expected return equal to 5.04%

13. Suppose that an FI holds two loans with the following characteristics. Annual Spread between Loan Rate and FI's cost of funds Loan 1 2 Xi ? ? 6% 4% A. X1 = 50%, X2 = 50% B. X1 = 40%, X2 = 60% C. X1 = 30%, X2 = 70% D. X1 = 20%, X2 = 80% E. X1 = 10%, X2 = 90% Annual Fees 2% 1% Loss to FI Given Default 40% 30% Expected Default Frequency 2.50% 1.50% Correlation -0.1 Using Moody's Analytics Portfolio Manager model, what portfolio weights do you want to put on the two loans in order to make the portfolio expected return equal to 5.04%

Corporate Fin Focused Approach
Corporate Fin Focused Approach
5th Edition
ISBN:9781285660516
Author:EHRHARDT
Publisher:EHRHARDT
Chapter4: Time Value Of Money
Section: Chapter Questions
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Need answers ASAP and the right one. 13. Suppose that an FI holds two loans with the following characteristics. Annual Spread between Loan Rate and FI's cost of funds Loan 1 2 Xi ? ? A. X1 = 50%, X2 = 50% B. X1 = 40%, X2 = 60% C. X1 = 30%, X2 = 70% 6% 4% D. X1 = 20%, X2 = 80% E. X1 = 10%, X2 = 90% Annual Fees 2% 1% Loss to FI Given Default 40% 30% Expected Default Frequency Correlation -0.1 Using Moody's Analytics Portfolio Manager model, what portfolio weights do you want to put on the two loans in order to make the portfolio expected return equal to 5.04% 2.50% 1.50%
Transcribed Image Text:Need answers ASAP and the right one. 13. Suppose that an FI holds two loans with the following characteristics. Annual Spread between Loan Rate and FI's cost of funds Loan 1 2 Xi ? ? A. X1 = 50%, X2 = 50% B. X1 = 40%, X2 = 60% C. X1 = 30%, X2 = 70% 6% 4% D. X1 = 20%, X2 = 80% E. X1 = 10%, X2 = 90% Annual Fees 2% 1% Loss to FI Given Default 40% 30% Expected Default Frequency Correlation -0.1 Using Moody's Analytics Portfolio Manager model, what portfolio weights do you want to put on the two loans in order to make the portfolio expected return equal to 5.04% 2.50% 1.50%
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