If foreclosure occurs, the (deadweight) cost paid to third parties will be $2,000,000. One-year US Treasuries are yielding 6% and investors require a risk premium of 1%. a. [2pts] What is strategic default, and how is it related to limited liability and the cost of foreclosure? b. [10pts] What would this loan sell for today if scenario Ill results in a deed-in-lieu, and scenario Il results in a strategic default in which the difference between the borrower's and lender's extreme position is split 50/50? c. [2pts] What is the present value cost of credit risk