Question
Consider two banks. Bank A has 1000 loans outstanding each for? $100,000, that it expects to...
Consider two banks. Bank A has 1000 loans outstanding each for? $100,000, that it expects to be fully repaid today. Each of Bank? A's loans have a? 6% probability of? default, in which case the bank will receive? $0 for each of the defaulting loans. Bank B has 100 loans of? $1 million? outstanding, which it also expects to be fully repaid today. Each of Bank? B's loans have a? 5% probability of? default, in which case the bank will receive? $0 for each of the defaulting loans. The chance of default is independent across all the loans. The standard deviation of the overall payoff to Bank A is closest? to:
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