In this case, what will the bank's expected loss be?

In this case, what will the bank’s expected loss be?

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Gamma Bank provides a $100,000 loan to Big Bath retail stores at 5% interest rate (paid annually). The loan is collateralized with $55,000. The loan also has an annual expected default rate of 2%, and loss given default at 50%.

In this case, what will the bank’s expected loss be?
A . $500
B . $750
C . $1,000
D . $1,300

Answer: A