Local Bank, Inc., (LBI) has loaned funds to a private manufacturing company, named We make It All (Make It). The current balance of the loan is $1 million and it is secured by a piece of land and the corresponding building owned by Make It. Due to an economic downturn, Make It suffered a loss for the first time in its 10-year operating history and is currently experiencing some cash flow difficulties. In addition, the land and building that is held as collateral has recently been appraised at only $800,000. Based only on the information provided, which of the following risks faced by LBI have increased?
A.
Bankruptcy risk and default risk
B.
Bankruptcy risk and settlement risk
C.
Default risk and downgrade risk
D.
Default risk, downgrade risk, and settlement risk