Please use the following information for the next TWO questions: Bank OZ has made a one-year loan to firm VIC. The estimated probability of default of this loan is 5%. The estimated loan recovery rate upon loan default is 0%. The bank has also made a two-year loan with firm VIC that provides a return of 10% per annum if the loan is not defaulted. And the bank will lose all the claims on principal and interests upon loan default. The yield is 2% per annum for the 1-year maturity government bond. Based on the prices of 1-year and 2-year maturity government bond prices, the forward rate for the 2nd year is 4% per annum. What is the cumulative probability of repayment (ie. not default) of firm VIC over the two years? (please choose the closest answer) Select one: O a. 0.8598 O b. 0.8767 O c 0.9363 O d. 0.9644 O 0.9879 What is the expected probability of default of firm VIC in the 2nd year? Select one: O a. 0.0637 O. .0949 O c 0.0772 O d. 0.9051 O 0.9363 Which of the following statements does NOT reflect credit decisions at the retail level? Select one: a. Loans are typically of small size. O b. The financial institutions usually control the credit risk by limiting the quantity of loans made available to retail borrowers and credit rationing. O c. The financial institutions rely mainly on the pricing tool. i.e. setting a higher interest rate for riskier borrowers to address credit risk. O d. It is economically inefficient to collect detailed information about borrowers' credit quality. Oe. Usually a standard loan rate is charged. a