Cube Bank has compiled the following migration matrix on consumer loans. The higher the risk grade the

higher the default risk. If in the most recent year, the bank manager finds that the transition probability from

risk grade $1$ to $3$ is $0\mathrm{.}05$ and to $4$ is $0\mathrm{.}06,$ then the bank manager should take which of the following actions to

reduce concentration risk?

Select one:

a$.$ Increase credit risk premium on risk $3$ borrowers.

b$.$ Increase supply of loans to risk grade $2$ borrowers.

c$.$ Restrict supply of loans to risk grade $1$ borrowers.

d$.$ Increase supply of loans to risk grade $3$ borrowers.

e$.$ Restrict supply of loans to risk grade $2$ borrowers.