The same approach as question 29 is applied here but focuses on the straightforward default calculation without collateral consideration:
* Loan Amount (EAD): $100,000
* Loss Given Default (LGD): 50% of EAD =50%×$100,000=$50,000LGD=50%×$100,000=$50,000
* Annual Expected Default Rate: 2%
* Expected Loss: Annual Expected Default Rate × LGD
Expected Loss=2%×$50,000=0.02×50,000=$1,000Expected Loss=2%×$50,000=0.02×50,000=$1,000 Hence, the expected loss due to default is $1,000 without considering the collateral. If considering the collateral explicitly, it would be slightly different as the collateral reduces the direct exposure.