Calculate the expected loss

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Question - The company CAOBITA, S.A., took a three-year maturity loan from a local financial entity for $100,000. Eight months later, the company has some financial problems due to a drop in sales; as well as, due to poor collection management, some of its customers are late in their payments. The assumption is made that the probability of default by the company is 50%. At this time, the balance covered by the insurance policy amounts to $70,000. It is requested:

Calculate the Expected Loss that the financial entity must provision given the current status of the debtor.

Now calculate the PE, at the time of granting the loan, knowing that the interest rate is 22%.

Reference no: EM133172431

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