You are a banker that is considering extending a loan to a small business. The most...
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You are a banker that is considering extending a loan to a small business. The most recent economic data suggests that the default rate for such a loan is 2%, across all borrowers. Of businesses that default on their loans, 80% had a debt-to-equity ratio of over 2.0. Across all borrowers, 50% have debt to equity ratios over 2.0. If the loan applicant has a debt-to-equity ratio of over 2.0, what is their default risk? Consider a population of 1,000 businesses. Fill in the following values. D:E > 2.0 D:E You are a banker that is considering extending a loan to a small business. The most recent economic data suggests that the default rate for such a loan is 2%, across all borrowers. Of businesses that default on their loans, 80% had a debt-to-equity ratio of over 2.0. Across all borrowers, 50% have debt to equity ratios over 2.0. If the loan applicant has a debt-to-equity ratio of over 2.0, what is their default risk? Consider a population of 1,000 businesses. Fill in the following values. D:E > 2.0 D:E
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