Expected loan repayment from bank perspective


A bank issues a $100 loan to a borrower and required loan repayment is $125. The borrower who takes out the loan will make the full repayment with probability 0.85, but with probability 0.15, will only pay the bank $65. Then what is the expected loan repayment from the bank's perspective?

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Finance Basics: Expected loan repayment from bank perspective
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