12-35 in the KMV Portfolio Model,the Expected Return on a Loan

question 46

Multiple Choice

12-35 In the KMV portfolio model,the expected return on a loan is the

• A)annual all-in-spread minus the expected loss on the loan.
• B)annual all-in-spread minus expected probability of the borrower defaulting over the next year.
• C)annual all-in-spread minus the loss given default.
• D)the interest and fees paid by the borrower minus the interest paid by the FI to fund the loan.
• E)the interest and fees paid by the borrower minus the expected loss on the loan.