Suppose that a bank has a made a large number of loans of certain type. The one-year probability of default on each loan is 1%. The bank uses a Gaussian copula for time to default. It is interested in estimating a 99.97% worst case for the percentage of loans that default on the portfolio. Compute the worst-case default rate, assume the copula correlation is 0.10.

a.

2.59%

b.

6.04%

c.

27.08%

d.

11.85%