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you have granted an unsecured loan to a. 13 company. This loan will be paid off by a single payment of $250 million. The company
you have granted an unsecured loan to a. 13 company. This loan will be paid off by a single payment of $250 million. The company has a 5% chance of defaulting over the life of the transaction and your calculations indicate that if it defaults you would recover 60% of your loan from bankruptcy courts. If you are required to hold a credit reserve equal to your expected credit loss, how great a reserve should you hold?(final answer)
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