A bank is working out recovery calculation for its defaulted corporate loan facility. The loan defaulted in the year 2008 was a secured and senior one. The defaulted outstanding is Rs. 16 crore. A...

A bank is working out recovery calculation for its defaulted corporate loan facility. The loan defaulted in the year 2008 was a secured and senior one. The defaulted outstanding is Rs. 16 crore. A total recovery amount of Rs. 8 crore 50 lakh up to year 2014 was completed with total costs of Rs. 1 lakh 25 thousand. Suppose that both the recoveries and the costs are entirely obtained and paid at the end of the 2014. Using an 10% discount rate (which is the average risk free rate with a spread), can you estimate the value of Eco–LGD at the time of default? What happens to Economic LGD if recovery settlement time is delayed?