David invests $100 in a newly listed corporate bond. The promised payback on this bond in 2 years is $120. He estimates that there is a 3% probability that the company will default on the bond with a recovery of 15% of the promised amount. There is also a 10% probability that the company will default on the bond, and he will be able to recover 80% of the promised amount. With a 90% probability, the company will not default and repay the bond in full.

David is asking your help to calculate the 90%-VaR on this bond? Please help him and briefly explain your work.