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:

Information Sharing

The practice of exchanging information between parties, ensuring that all stakeholders in a process or system have the data necessary to make informed decisions.

Analytics

Analytics involves the systematic computational analysis of data or statistics, used for the discovery, interpretation, and communication of meaningful patterns in data.

Decision Making

The cognitive process of selecting a course of action from among multiple alternatives.

Strategic Decisions

High-level choices that determine the overall direction of an organization.