Assuming a constant default probability per year and a constant loss given default, for a simplified reduced form model, and given the following information about a bond Face value 864 Time to maturity 2 Default intensity ( ) 2 7 Loss given default ( ) 53 Price of 2 year risk free zero coupon bond (per $) 0 97 What is the expected loss on the bond

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Question: Assuming a constant default probability per year and a constant loss given default, for a simplified reduced form model, and given the following information about

Assuming a constant default probability per year and a constant loss given default, for a simplified reduced form model, and given the following information about a bond:

Face value	864
Time to maturity	2
Default intensity (%)	2.7
Loss given default (%)	53
Price of 2 year risk free zero coupon bond (per $)	0.97

What is the expected loss on the bond?

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