In Models That Are Based on Loan Loss Ratios, a β

question 4

Multiple Choice

In models that are based on loan loss ratios, a β that is found to be less than one for a particular loan sector indicates that

• A)the loans in that sector will soon be downgraded soon.
• B)the FI should increase its concentration in that loan sector due to the high rates of return.
• C)the loan losses in that sector are systematically lower relative to total loan losses.
• D)the FI should decrease its exposure to that sector because losses are higher than the rest of the portfolio
• E)the calculation is in error because β is restricted to be greater than onE.

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Definitions:

Training Motivation

The internal drive or desire within employees to participate in learning activities and apply the knowledge gained.

Internal

Pertaining to something within a particular sphere, organization, or entity, typically referring to processes, policies, or practices.

External

In a business or organizational context, external refers to factors, influences, or resources that originate outside of the organization.

Kolb's Models

Theoretical frameworks by David Kolb that describe the experiential learning cycle, involving concrete experience, reflective observation, abstract conceptualization, and active experimentation.