Question: Credit risk measures using the reduced form model: assume a company has the following values for its debt issue. Face value of the firms debt:

Credit risk measures using the reduced form model: assume a company has the following values for its debt issue. Face value of the firms debt: K = $1,000 Time to maturity of the debt (tenor): T t = 1 year (T = maturity) Default intensity (approx prob of default per year): = 0.02 Loss given default: = 0.3 (30%) P(t,T) = 0.95 What is the present value of the expected loss? (Select the answer that most closely matches the results of your calculations.)

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