Suppose that as a loan officer for a bank you just completed a 1 million loan to a small business. This is a senior unsecured loan, with one-year maturity and carries a 10% p.a. interest rate. You rate the borrower internally as B-, which translates into a one-year probability of default (PD) estimate of 10%. Loss given default (LGD) for the loan is estimated as 30%. Determine the expected cash flow from the loan at maturity.

a.

1,123,000

b.

1,034,000

c.

1,067,000