Question: Example #1. Concentration Limits for Loan Portfolio Suppose management is unwilling to permit losses exceeding 15 percent of an FI's capital to a particular sector.

$Example \#1. Concentration Limits for Loan Portfolio Suppose management is unwilling$

Example \#1. Concentration Limits for Loan Portfolio Suppose management is unwilling to permit losses exceeding 15 percent of an FI's capital to a particular sector. If management estimates that the amount lost per dollar of defaulted loans in this sector is 40 cents, what is the maximum loan a manager can lend to firms in this sector as a percentage of capital? In other words, estimate the concentration limit

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