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6. You have granted an unsecured loan to a company. This loan will be paid off by a single payment of $50 million. The company
6. You have granted an unsecured loan to a company. This loan will be paid off by a single payment of $50 million. The company has a 3% chance of defaulting over the life of the transaction and your calculations indicate that if it defaults you would recover 70of your loan from bankruptcy courts. If you are required to hold a credit reserve equal to your expected credit loss, how great a reserve should you hold? (2 points)
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