To estimate the interest charges on the loan, an analyst should use one of the following four formulas:

To estimate the interest charges on the loan, an analyst should use one of the following four formulas:
A . Loan interest = Risk-free rate – Probability of default x Loss given default + Spread
B . Loan interest = Risk-free rate + Probability of default x Loss given default + Spread
C . Loan interest = Risk-free rate – Probability of default x Loss given default – Spread
D . Loan interest = Risk-free rate + Probability of default x Loss given default – Spread

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Answer: B