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ABC Bank is considering selling 3 years loan of $100 million 8% interest with recourse to a buyer using an 8.5% discount rate. The buyer
ABC Bank is considering selling 3 years loan of $100 million 8% interest with recourse to a buyer using an 8.5% discount rate. The buyer is negotiating with the bank to buy the loan without recourse with a 9.5% discount rate. If you know that the loan is expected to have a 0.50 % default, the bank should sell the loan with:
a. With recourse
b. Without recourse
c. Buy insurance for the loan defaulting and sell without recourse
d. There is no enough information to decide
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