Today, a bank holds a loan Question Expected Loss, position with the following characteristics: face value: 75,000 interest rate: 4.9% maturity: 3 years interest payment: annually loan redemption: annually at equal rates Additionally, the following data is available: recovery rate: 30% . probability of default (in year n): maturity n in years 1 probability Pn in % 0.9 2 1.1 3 1.2 swap rates: 1 maturity n in years swap rate rn in % 2 4.2 3 4.8 3.8 (a) Determine the cash-flows from the point of view of the bank. (b) Calculate the expected loss. Today, a bank holds a loan Question Expected Loss, position with the following characteristics: face value: 75,000 interest rate: 4.9% maturity: 3 years interest payment: annually loan redemption: annually at equal rates Additionally, the following data is available: recovery rate: 30% . probability of default (in year n): maturity n in years 1 probability Pn in % 0.9 2 1.1 3 1.2 swap rates: 1 maturity n in years swap rate rn in % 2 4.2 3 4.8 3.8 (a) Determine the cash-flows from the point of view of the bank. (b) Calculate the expected loss