Which of the following statements is a key difference between customer loans and interbank loans?

Alpha Bank determined that Delta Industrial Machinery Corporation has 2% change of default on a one-year
no-payment of USD $1 million, including interest and principal repayment. The bank charges 3% interest rate
spread to firms in the machinery industry, and the risk-free interest rate is 6%. Alpha Bank receives both
interest and principal payments once at the end the year. Delta can only default at the end of the year. If Delta
defaults, the bank expects to lose 50% of its promised payment. Six months after Alpha Bank provides USD
$1 million loan to the Delta Industrial Machinery Corporation, a new competitor enters the machinery
industry, causing Delta to adjust its prices and mark down the value of its inventory. Hence, the probability of
default increases from 2% to 10% and the loss given default increases from 50% to 75%. If Alpha Bank can
reprice the loan, what should the new rate be?

The Basel II Accord's operational risk definition excludes all of the following items EXCEPT:

Unico Delta stock is trading at $20 per share, its annualized dividend yield is 5% and the 12-month LIBOR is
3%. Given these statistics, the 12-month futures contact will trade at:

When looking at the distribution of portfolio credit losses, the shape of the loss distribution is ___ , as the
likelihood of total losses, the sum of expected and unexpected credit losses, is ___ than the likelihood of no
credit losses.