A commercial bank is planning to offer Luna a loan in the amount of $15,000 and the bank figures that Luna will repay the loan in full with probability 0.79 and default otherwise. Also, Luna has asked for an interest rate of 12%. In order for the bank to be able to offer this rate, what is the collateral amount that Luna must offer the bank in the event of default? $8,177.5 $8,228.6 $8,366.9 $8,401.1

MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
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Chapter1: Starting With Matlab
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M2
A commercial bank is planning to offer Luna a loan in
the amount of $15,000 and the bank figures that Luna
will repay the loan in full with probability 0.79 and
default otherwise. Also, Luna has asked for an interest
rate of 12%. In order for the bank to be able to offer
this rate, what is the collateral amount that Luna must
offer the bank in the event of default?
$8,177.5
$8,228.6
$8,366.9
$8,401.1
Transcribed Image Text:A commercial bank is planning to offer Luna a loan in the amount of $15,000 and the bank figures that Luna will repay the loan in full with probability 0.79 and default otherwise. Also, Luna has asked for an interest rate of 12%. In order for the bank to be able to offer this rate, what is the collateral amount that Luna must offer the bank in the event of default? $8,177.5 $8,228.6 $8,366.9 $8,401.1
Expert Solution
Step 1

Given:

Loam amount = $15000

Interest rate = 12%

Repay probability = 0.79

Formula Used:

Collateral amount = Loan amount - repaid amount×Repay probabilityDefault probability

repaid amount = Loan amount × (1+interest rate)

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