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%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Subject:- finance
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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