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The concept of credit risk refers to the risk that a party that owes money will not pay. Which of the following additional statements does it encompass?

Consider a bank with two independent loans, X and Y. Loan X is for $100,000 and has a probability of default of 4%. If default occurs, Loan X will lose 80% of the amount due. Loan Y is for $250,000 and has a probability of default of 7%. If default occurs, Loan Y will lose 70% of the amount due. Which of the following is the expected loss?

A lender has two loans outstanding. Loan A has a probability of default of 3%. If A defaults, B has a probability of default of 70%. If A does not default, B has a probability of default of 5%. Which of the following is the probability that B will default?

A stock priced at $25 can go up by 30% with a probability of 70% or down by 15% with a probability of 30%. The risk-free rate is 3%. Find the price of a one-period European call option with an exercise price of $20.

A physician prescribed 0.3 mg of a drug twice daily. The medication is available in 0.15 mg tablets. The nurse would give 2 tablets for each dose.

15.5 ml = 2.5 tsp

A child was prescribed 10 mL of cough syrup four time a day , as needed. The child’s mother administered  2 tsp.

15 in = 48 cm

A physician prescribed 0.5 mg of a drug twice daily. The medication is available in 0.25 mg tablets. The nurse would give 0.6 mg daily.

A 40-Ib child was ordered a drug to be given at 10 mg per kg body weight. The child should receive 88 milligrams of the drug.