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MBA,MCS,M.phil
Devry University
Jan-2008 - Jan-2011
MBA,MCS,M.Phil
Devry University
Feb-2000 - Jan-2004
Regional Manager
Abercrombie & Fitch.
Mar-2005 - Nov-2010
Regional Manager
Abercrombie & Fitch.
Jan-2005 - Jan-2008
An entrepreneur is quoted a loan rate of 12% at the local bank, while the bank pays depositors 6% per annum.
(a) If in bankruptcy the entrepreneur will not pay back anything, but otherwise everything will be repaid, then what does the bank believe the probability of failure to be?
(b) What is the quoted default premium?
(c) Compute the expected default premium
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