A bank has two $10 million one-year loans. The probabilities of default are asindicated in the following table.OutcomeProbabilityNeitherloandefaults95%Loan 1defaults;Loan 2does notdefault2.5%Loan 2defaults;Loan 1does notdefault2.5%Bothloansdefault0%If a default occurs, all losses between 20% and 50% of the principal are equallylikely. If the loan does not default, a profit of $0.5 million is made. What is thebank's one-year 99.5% VaR?a.3.3 millionb.4.2 millionC.4.7 milliond.3.5 million

d option i very much correctoption that is 3.5 million....

Answered: If a default occurs, all losses between…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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The triple L investment club is considering purchasing a certain stock. After considerable research the club members determine that there is a 50% chance of making $9000, a 20% chance of breaking even, and a 30% chance of losing $6600. Find the expectation of this purchase.
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If a default occurs, all losses between 20% and 50% of the principal are equally likely. If the loan does not default, a profit of $0.5 million is made. What is the bank's one-year 99.5% VaR? a. 3.3 million b. 4.2 million C. 4.7 million d. 3.5 million