It Is Assumed That a Company Can Default After One

Multiple Choice

It is assumed that a company can default after one year or after two years.The probability of default at each time is 1.5%.The present value of the expected loss to a bank on a derivatives portfolio if the company defaults after one year is estimated to be $1 million.The present value of the expected loss if it defaults after two years is estimated to be $2 million.Which of the following is the bank's CVA ?

A) $3,000,000
B) $300,000
C) $45,000
D) $150,000