Consider two local banks. Bank A has 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 89 million outstanding, which it also expects will be repaid today. It also has a 4% probability of not being repaid.

Calculate the following: Show all your work and how you solved using excel?

A.

The expected overall payoff of Bank A is $ million.

The expected overall payoff of Bank B is $ million.

B.

The standard deviation of the overall payoff Bank A is ? (Round to two decimal places.)

The standard deviation of the overall payoff Bank B is ? (Round to two decimal places.)