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

question 95

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 A is:

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

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Definitions:

THC

Tetrahydrocannabinol, the psychoactive compound found in cannabis that produces mind-altering effects.

Major Active Ingredient

The component of a substance, usually a drug, that is primarily responsible for its effects on the body or mind.

Marijuana

A drug with mind-altering properties derived from the Cannabis plant, utilized either for health-related or leisure activities.

Nicotine

A stimulant and active ingredient found in tobacco, responsible for its addictive properties.