Consider two local banks. Bank A has 100 loans outstanding, each for $ 1.0 million, that it expects will be repaid today. Each loan has a 5 % probability of default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $ 100 million outstanding, which it also expects will be repaid today. It also has a 5 % probability of not being repaid. Which bank faces less risk? Why? (Select the best choice below.)

A. The expected payoffs are the same, but Bank A is less risky. I prefer Bank A.

B. The expected payoff is higher for Bank A, but is riskier. I prefer Bank B.

C. In both cases the expected loan payoff is the same: $ 100 million times 0.95 equals $ 95.0 million . Consequently, I don't care which bank I own.

D. The expected payoffs are the same, but Bank A is riskier. I prefer Bank B.