Answer: Loan 2 < Loan 1 < Loan 3

## Expected Loss Calculation Expected Loss (EL) = Exposure at Default (EAD) × Probability of Default (PD) × Loss Given Default (LGD) ### Loan 1 - Notional: $30,000,000 - Tenor: 2 years - LGD: 0.75 - Rating: BB- (Non-Investment Grade) - PD for 2 years (Non-Investment Grade): 0.10 - EL = 30,000,000 × 0.10 × 0.75 = $2,250,000 ### Loan 2 - Notional: $100,000,000 - Tenor: 3 years - LGD: 0.90 - Rating: A (Investment Grade) - PD for 3 years (Investment Grade): 0.03 - EL = 100,000,000 × 0.03 × 0.90 = $2,700,000 ### Loan 3 - Notional: $100,000,000 - Tenor: 1 year - LGD: 0.70 - Rating: B+ (Non-Investment Grade) - PD for 1 year (Non-Investment Grade): 0.05 - EL = 100,000,000 × 0.05 × 0.70 = $3,500,000 ### Ordering from Lowest to Highest - Loan 1: $2,250,000 - Loan 2: $2,700,000 - Loan 3: $3,500,000 Therefore, the correct order is: **Loan 2 < Loan 1 < Loan 3**

Author: LeetQuiz .