25,000 credit cards will be issued during the following year. The expected probability of a credit card fraud is 0.05. If every fraud results in an operational loss of $1000. Use the IMA approach to answer the following questions. Assume no variability in LGE.

1. Calculate the annual expected loss.

2. Calculate the annual unexpected loss.

3. Calculate the operational risk capital charge and report the value of a convenient gamma.

4. What supervisory requirements should banks comply with when they use the IMA

   approach?