Gamma Bank provides a $100,000 loan to Big Bath retail stores at 5% interest rate...

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 × LGDExpected 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.