Assume That the Maximum Loss as a Percentage of Capital $\times$

question 36

Multiple Choice

Assume that the maximum loss as a percentage of capital is 9 per cent of an FI's capital to a particular sector and that the amount recovered per dollar of defaulted loans in this sector is 70 per cent. What is the concentration limit (round to two decimals) ?

• A) 9% \(\times\) (1/0.7) = 12.86%
• B) 9% \(\times\) [1/(1-0.7)] = 30.00%
• C) 70% / (1/0.09) = 6.30%
• D) (100% - 70%) / (1/0.09) = 2.70%

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Definitions:

Supply Curve

A graphical representation showing the relationship between the price of a good and the amount of it that suppliers are willing to produce.

Actual Price

The price at which goods or services are sold in the market, as opposed to theoretical or listed prices.

Supply-Side Market Failure

A situation where the production of a good or service does not take into account the full cost of its impact, leading to overproduction or underproduction.

Transcontinental Railway

A railroad system that crosses an entire continent, connecting distant locations and facilitating transportation and trade.