If Super Corp. has a policy of limiting their loans to any single customer so that the maximum loss as a percent of capital will not exceed 18 percent for both secured and unsecured loans. The limit has been adopted under the assumption that if the unsecured loan is defaulted, there will be no recovery of interest or principal payments. For loans that are secured (collateralized), it is expected that 38 percent of interest and principal will be collected. What is the concentration limit as a % of capital for secured loans made by this bank? Briefly discuss the importance of the concentration ratio.

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To calculate the concentration limit for secured loans we need to consider the maximum loss as a per... View the full answer