Assume That B = $200 000, R = 1 Year

Multiple Choice

Assume that B = $200 000, r = 1 year, i = 7 per cent, d = 0.9, N(h₁) = 0.174120 and N(h₂) = 0.793323. Using Moody's KMV Credit Monitor Model, what is the required risk premium on the loan (round to two decimal places) ?

A) 0.13 per cent
B) 0.91 per cent
C) 1.64 per cent
D) 6.30 per cent