An analyst developed two scenarios with respect to the recovery of $100,000 principal from defaulted loans: The

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An analyst developed two scenarios with respect to the recovery of $100,000 principal from defaulted loans:

Probability of Scenario (%) Probability of Amount (%) Amount Recovered ($) Scenario 60 40 50,000 30,000 40 90 60 80,000

The amount of the expected recovery is closest to:
A. $36,400
B. $63,600
C. $81,600

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Quantitative Investment Analysis

ISBN: 978-1119104223

3rd edition

Authors: Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, David E. Runkle

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Question Posted: Mar 21, 2018 05:49 AM

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An analyst developed two scenarios with respect to the recovery of $100,000 principal from defaulted loans: The

Question:

Probability of Scenario (%) Probability of Amount (%) Amount Recovered ($) Scenario 60 40 50,000 30,000 40 90 60 80,000 10 60,000

Step by Step Answer:

B is correct If Scenario 1 occurs the expected recovery is 60 50000 40 30000 42000 ...View the full answer

Quantitative Investment Analysis

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