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Annual Spread between Loss to FI Expected Loan Rate and FIs Annual Given Default Loan X i Cost of Funds Fees Default Frequency 1 0.45

Annual

Spread between Loss to FI Expected

Loan Rate and FIs Annual Given Default

Loan Xi Cost of Funds Fees Default Frequency

1 0.45 5.5% 2.25% 30% 3.5% 12 = 0

2 0.55 3.5 1.75 20 1.0

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