Explanation:
Expected loss = Probability of default at time H × Exposure amount at time H × Loss rate experienced
= PD × EA × LR
= $100 \times 0.2 \times 0.1 = 2$ million
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Q.3667 American International Bank sanctioned a loan to a corporate client. The following particulars are given in the credit note by credit analyst of the client:
What is the expected loss of the loan?
A
USD 2 million
B
USD 20 million
C
USD 10 million
D
USD 40 million
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