Use the Following Information to Answer the Problem(s)below

question 93

Multiple Choice

Use the following information to answer the problem(s) below.
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 expected overall payoff to Bank B is:

• A)$5,000,000.
• B)$6,000,000.
• C)$94,000,000.
• D)$95,000,000.

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Definitions:

Incubation

In the context of creativity and problem-solving, the process of setting aside a problem temporarily, allowing for subconscious thinking to aid in solution development.

Illumination

The process or result of providing or being provided with light.

Emotional Intelligence

The capacity to be aware of, control, and express one's emotions judiciously and empathetically, also understanding the emotions of others.

Relationships

Connections or associations between individuals, governed by social, emotional, professional, or biological factors.