15-26 From the perspective of the lending FI,the risk of a well-diversified portfolio of loans should be less than weighted average risk of the individual loans.

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This is true because a well-diversified portfolio of loans spreads risk across multiple types of borrowers and industries, reducing the impact of individual defaults. The weighted average risk of the individual loans is likely higher because it does not take into account the effects of diversification.

15-26 from the Perspective of the Lending FI,the Risk of a Well-Diversified