Candice is a risk analyst at Stable Bank. She is trying to estimate the credit value at risk (credit VaR) of a 3-bond portfolio, where the credit VaR is defined as the maximum unexpected loss at 99.0% confidence level over a one-year horizon. The bonds are independent (i.e., no default correlation) and identical with a value of $1.0 million each, a one-year default probability of 4% and an assumed zero recovery rate. Which is nearest to the one-year 99.0% credit VaR?

Number of defaults - probability:

0 - 88.4736%

1 - 11.0592%

2 - 0.4608%

3 - 0.0064%