A is correct. Using the terminology of value-at-risk (VaR), the 1-year 99% unexpected loss of a portfolio is equal to its expected loss subtracted from its VaR with a 1-year time horizon and a 99% confidence level. The expected loss equals portfolio default rate * (1 – recovery rate) * exposure at default = 0.025 * (1 – 0.3) * 120 = SGD 2.1 million. Therefore, the UL of this loan portfolio is 9.6 – 2.1 = SGD 7.5 million.

B is incorrect. This is the 1-year, 99% VaR plus the expected loss.

C is incorrect. This is the 1-year, 99% ES minus the expected loss.

D is incorrect. This is the 1-year, 99% ES plus the expected loss.