# write my assignment 8388

Consider two local banks. Bank A has 94 loans​ outstanding, each for \$1.0 ​million, that it expects will be repaid today. Each loan has a 4%probability of​ default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of \$94million​ outstanding, which it also expects will be repaid today. It also has a 4% probability of not being repaid. Which bank faces less​ risk? Why?A.The expected payoffs are the​ same, but Bank A is less risky. I prefer Bank A.B.The expected payoff is higher for Bank​ A, but is riskier. I prefer Bank B.C.In both cases the expected loan payoff is the​ same:\$ 94 million times 0.96 equals \$ 90.2 million\$94 million×0.96=\$90.2 million.​Consequently, I​ don't care which bank I own.D.The expected payoffs are the​ same, but Bank A is riskier. I prefer Bank B.

Consider two local banks. Bank A has 94 loans​ outstanding, each for \$1.0 ​million, that it expects will be repaid today. Each loan has a 4%

probability of​ default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of \$94

million​ outstanding, which it also expects will be repaid today. It also has a 4% probability of not being repaid. Which bank faces less​ risk? Why?

A.

The expected payoffs are the​ same, but Bank A is less risky. I prefer Bank A.

B.

The expected payoff is higher for Bank​ A, but is riskier. I prefer Bank B.

C.

In both cases the expected loan payoff is the​ same:

\$ 94 million times 0.96 equals \$ 90.2 million\$94 million×0.96=\$90.2 million.

​Consequently, I​ don’t care which bank I own.

D.

The expected payoffs are the​ same, but Bank A is riskier. I prefer Bank B.