Question
1. Two firms borrowed from a bank. The first firm borrowed $40m and the second firm $60m. The probabilities of default are 3% and 5%,
1. Two firms borrowed from a bank. The first firm borrowed $40m and the second firm $60m. The probabilities of default are 3% and 5%, respectively. The recovery rates are 70% and 35%, respectively. Calculate the total expected loss from both loans
2. How do higher recovery rates affect the expected loss and the unexpected loss?
3. The Combined ratio after dividends of the overall insurance business of Insurance services LTD is 105%. What can cause it?
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Business Forecasting
Authors: John E. Hanke, Dean Wichern
9th edition
132301202, 978-0132301206
