Consider two local banks. Bank A has

93 loans outstanding, each for $1.0 million, that it expects will be repaid today. Each loan has a 4%

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 $93 million outstanding, which it also expects will be repaid today. It also has a 4% probability of not being repaid. Calculate the following:

a. what is the expected overall payoff of each bank.

b. what is the standard deviation of the overall payoff of each bank.