Since all positions are obligations from the same obligor, the implication is that the default correlation is 1, and the entire portfolio with behave as if it is a single credit. The portfolio has a 4% probability of total loss and a 96% probability of zero loss. With a recovery rate of zero, the extreme loss given default is $10,000,000.

The expected loss is $400,000 (total portfolio value times the probability of default = 0.04 × 10,000,000). The credit VaR is defined as the quantile of the credit loss less the expected loss of the portfolio. At 99% confidence,

Credit VaR = $10,000,000 − $400,000 = $9,600,000