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:

Imported Good

A product or service brought into one country from another country in a legitimate fashion, typically for use in trade.

Domestic Consumers

Domestic consumers refer to individuals and households within a country who purchase goods and services for personal use, contributing to the internal demand of the country's economy.

Net Welfare Loss

The loss in social welfare, usually due to inefficiencies in the market system or government intervention policies that lead to misallocation of resources.

Specific Tariff

A fixed fee imposed by a government on imported or exported goods, based on physical units like weight or quantity.