Assume that the maximum loss as a percentage of capital is 12% of an FI's capital to a particular sector and that the amount lost per dollar of defaulted loans in this sector is 35%.What is the concentration limit (round to two decimals) ?
A) 12% * (1/0.35) = 34.29%
B) 35% * (1/0.12) = 4.2%
C) 12% / (1 + 0.35) = 8.89%
D) 35% / (1 + 0.12) = 31.25%
Correct Answer:
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