What is your understanding of loss

Reference no: EM133715738

QUESTION 1

1 What is your understanding of loss given default (LGD), exposure at default (EAD) and maturity (M). Explain how they are related to expected loss (EL) of a credit asset.

2 Magong Community Bank has a R900 million loan with Sedibelo Construction with a maturity of one year. The probability of default on the loan is 1.85% and the recovery rate is assumed to be 25%. Calculate the expected loss for Magong Community Bank's loan to Sedibelo Construction?

3 Commercial Bank of Ciskei has granted a loan of R19m to Gqeberha Fish Farms, secured by a portfolio of blue-chip shares with a current market value of R26m. As per the policy of the bank, a 50% margin is required on collaterals of equity shares. Provide an appropriate facility grade, assuming Commercial Bank of Ciskei follows the Facility.

4 As Head of Relationship Banking at the Royal Manikaland Bank, you are negotiating pricing with Harare Greater Metro, which insists on an interest rate of 12% on the proposed short-term credit facility. What would the implied PD at this rate be if the one year treasury bill rate is 8%?

Reference no: EM133715738

Questions Cloud

Why are u.s treasuries considered safe and how can one lose : Why are U.S treasuries considered safe and how can one lose money by investing in them? How do investors use bond ratings when investing?

What types of markets are stocks traded in : What types of markets are stocks traded in? Name 3 well known stock markets in the U.S

Discuss the various theories the organization would use : Using the text and suggested readings, discuss the various theories the organization would use to design and implement program services.

What is the projects internal rate of return : A project with an initial cost of $53,640 is expected to generate annual cash flows of $17,790 for the next 5 years. What is the project's internal rate

What is your understanding of loss : What is your understanding of loss given default (LGD), exposure at default (EAD) and maturity (M). Explain how they are related to expected loss (EL)

How individual appear to at intake and again at termination : The major presenting problem that brought the client to you. How the individual appeared to be at intake and again at termination

How much money can she save by using her line : How much money can she save by using her line of credit to pay the supplier the discounted amount instead of waiting to pay the full amount later

Explain the meaning of the loan-to-value ratio : Explain the meaning of the loan-to-value ratio from a mortgage lender 's pers pec- tive and from the viewpoint of an investor.

How do people typically use the platform instagram : How do people typically use the platform Instagram? Provide examples (at least 3 examples).

User Account

All Pages