Consider two local banks. Bank A has 94 loans? outstanding, each for? $1.0 million, that it expects will be repaid today. Each loan has a 6% probability of? default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $94 million? outstanding, which it also expects will be repaid today. It also has a 6% probability of not being repaid. Calculate the? following:
a. The expected overall payoff of each bank.
b. The standard deviation of the overall payoff of each bank.