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If the recovery value for a-rated bonds in the event of

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An investor holds a portfolio of $100 million. This portfolio consists of A-rated bonds ($40 million) and BBB-rated bonds ($60 million). Assume that the one-year probabilities of default for A-rated and BBB-rated bonds are 3% and 5%, respectively, and that they are independent. If the recovery value for A-rated bonds in the event of default is 70% and the recovery value for BBB-rated bonds is 45%, what is the one-year expected credit loss from this portfolio?

A. $1,672,000

B. $1,842,000

C. $2,010,000

D. $2,218,000

Reference no: EM13568903

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