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Question 14 1 pts < Question Set 4 > Over the past 10 years, a bank has experienced the following loan losses on its C&I loans, consumer loans, and total loan portfolio. Year C&I Loans Consumer Loans Total Loans 2018 0.0080 0.0165 0.0075 2017 0.0088 0.0183 0.0085 2016 0.0100 0.0210 0.0100 2015 0.0120 0.0255 0.0125 2014 0.0104 0.0219 0.0105 2013 0.0084 0.0174 0.0080 2012 0.0072 0.0147 0.0065 2011 0.0080 0.0165 0.0075 2010 0.0096 0.0201 0.0095 2009 0.0144 0.0309 0.0155 Using regression analysis on these historical loan losses, the bank has estimated the following: Xc 0.002+0.8XL and Xh = 0.003 + 1.8X, where Xc = loss rate in the commercial sector, X₁ = loss rate in the consumer (household) sector, and XL = loss rate for its total loan portfolio. (1) If the bank's total loan loss rates increase to 10 percent, what are the expected loss rates in the commercial and consumer sectors? O Commercial Sector = 18.3%; Consumer Sector = 8.2% Commercial Sector = 18.0%; Consumer Sector = 8.0% O Commercial Sector = 8.0%; Consumer Sector = 18.0% O Commercial Sector = 8.2%; Consumer Sector = 18.3% Question 15 Assume the same information as in the previous question < Question Set 4 >. (2) In which sector should the bank limit its loans and why? Commercial Sector; The loss rates are systematically higher than the loss rates for the total loan portfolio. O None of the options. O Consumer Sector: The loss rates are systematically higher than the loss rates for the total loan portfolio. O Consumer Sector; The loss rates are systematically lower than the loss rates for the total loan portfolio. 1 pts

Question 14 1 pts < Question Set 4 > Over the past 10 years, a bank has experienced the following loan losses on its C&I loans, consumer loans, and total loan portfolio. Year C&I Loans Consumer Loans Total Loans 2018 0.0080 0.0165 0.0075 2017 0.0088 0.0183 0.0085 2016 0.0100 0.0210 0.0100 2015 0.0120 0.0255 0.0125 2014 0.0104 0.0219 0.0105 2013 0.0084 0.0174 0.0080 2012 0.0072 0.0147 0.0065 2011 0.0080 0.0165 0.0075 2010 0.0096 0.0201 0.0095 2009 0.0144 0.0309 0.0155 Using regression analysis on these historical loan losses, the bank has estimated the following: Xc 0.002+0.8XL and Xh = 0.003 + 1.8X, where Xc = loss rate in the commercial sector, X₁ = loss rate in the consumer (household) sector, and XL = loss rate for its total loan portfolio. (1) If the bank's total loan loss rates increase to 10 percent, what are the expected loss rates in the commercial and consumer sectors? O Commercial Sector = 18.3%; Consumer Sector = 8.2% Commercial Sector = 18.0%; Consumer Sector = 8.0% O Commercial Sector = 8.0%; Consumer Sector = 18.0% O Commercial Sector = 8.2%; Consumer Sector = 18.3% Question 15 Assume the same information as in the previous question < Question Set 4 >. (2) In which sector should the bank limit its loans and why? Commercial Sector; The loss rates are systematically higher than the loss rates for the total loan portfolio. O None of the options. O Consumer Sector: The loss rates are systematically higher than the loss rates for the total loan portfolio. O Consumer Sector; The loss rates are systematically lower than the loss rates for the total loan portfolio. 1 pts

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question 14 1 pts < Question Set 4 > Over the past 10 years, a bank has experienced the following loan losses on its C&I loans, consumer loans, and total loan portfolio. Year C&I Loans Consumer Loans Total Loans 2018 0.0080 0.0165 0.0075 2017 0.0088 0.0183 0.0085 2016 0.0100 0.0210 0.0100 2015 0.0120 0.0255 0.0125 2014 0.0104 0.0219 0.0105 2013 0.0084 0.0174 0.0080 2012 0.0072 0.0147 0.0065 2011 0.0080 0.0165 0.0075 2010 0.0096 0.0201 0.0095 2009 0.0144 0.0309 0.0155 Using regression analysis on these historical loan losses, the bank has estimated the following: Xc 0.002+0.8XL and Xh = 0.003 + 1.8X, where Xc = loss rate in the commercial sector, X₁ = loss rate in the consumer (household) sector, and XL = loss rate for its total loan portfolio. (1) If the bank's total loan loss rates increase to 10 percent, what are the expected loss rates in the commercial and consumer sectors? O Commercial Sector = 18.3%; Consumer Sector = 8.2% Commercial Sector = 18.0%; Consumer Sector = 8.0% O Commercial Sector = 8.0%; Consumer Sector = 18.0% O Commercial Sector = 8.2%; Consumer Sector = 18.3% Question 15 Assume the same information as in the previous question < Question Set 4 >. (2) In which sector should the bank limit its loans and why? Commercial Sector; The loss rates are systematically higher than the loss rates for the total loan portfolio. O None of the options. O Consumer Sector: The loss rates are systematically higher than the loss rates for the total loan portfolio. O Consumer Sector; The loss rates are systematically lower than the loss rates for the total loan portfolio. 1 pts
Transcribed Image Text:Question 14 1 pts < Question Set 4 > Over the past 10 years, a bank has experienced the following loan losses on its C&I loans, consumer loans, and total loan portfolio. Year C&I Loans Consumer Loans Total Loans 2018 0.0080 0.0165 0.0075 2017 0.0088 0.0183 0.0085 2016 0.0100 0.0210 0.0100 2015 0.0120 0.0255 0.0125 2014 0.0104 0.0219 0.0105 2013 0.0084 0.0174 0.0080 2012 0.0072 0.0147 0.0065 2011 0.0080 0.0165 0.0075 2010 0.0096 0.0201 0.0095 2009 0.0144 0.0309 0.0155 Using regression analysis on these historical loan losses, the bank has estimated the following: Xc 0.002+0.8XL and Xh = 0.003 + 1.8X, where Xc = loss rate in the commercial sector, X₁ = loss rate in the consumer (household) sector, and XL = loss rate for its total loan portfolio. (1) If the bank's total loan loss rates increase to 10 percent, what are the expected loss rates in the commercial and consumer sectors? O Commercial Sector = 18.3%; Consumer Sector = 8.2% Commercial Sector = 18.0%; Consumer Sector = 8.0% O Commercial Sector = 8.0%; Consumer Sector = 18.0% O Commercial Sector = 8.2%; Consumer Sector = 18.3% Question 15 Assume the same information as in the previous question < Question Set 4 >. (2) In which sector should the bank limit its loans and why? Commercial Sector; The loss rates are systematically higher than the loss rates for the total loan portfolio. O None of the options. O Consumer Sector: The loss rates are systematically higher than the loss rates for the total loan portfolio. O Consumer Sector; The loss rates are systematically lower than the loss rates for the total loan portfolio. 1 pts
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