Question 4
A bank granted company ABC a USD 1,998,929 loan with three years maturity. The bank estimates that, if the company defaults, it will recover only 0.409 (in percent) of its loan exposure and that the likelihood of that happening is 0.048 (in percent). Calculate the bank's expected loss (use 4 decimal points).
EL = EAD \cdot LGD \cdot PD = EAD \cdot (1 - RR) \cdot PD