12-23 Which of the Following Observations Concerning Concentration Limits Is

question 28

Multiple Choice

12-23 Which of the following observations concerning concentration limits is not true?

• A)Limits are set by assessing the borrower's current portfolio,its operating unit's business plans,its economists' economic projections,and its strategic plans.
• B)FIs set concentration limits to reduce exposures to certain industries and increase exposures to others.
• C)When two industry groups' performances are highly correlated,an FI may set an aggregate limit of less than the sum of the two individual industry limits.
• D)FIs may set aggregate portfolio limits or combinations of industry and geographic limits.
• E)Bank regulators in recent years have limited loan concentrations to individual borrowers to a maximum of 30 percent of a bank's capital.

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Definitions:

Note Payable

A written promissory note where the borrower agrees to pay back a specified sum of money to the lender on a certain date or on demand.