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As a senior loan officer at MC Financial Institution (FI), you have a loan application from a irm in the commercial sector. While the loan has been approved on the basis of an individual oan, you must evaluate the loan based on its impact on the risk of the overall loan portfolio. The FI uses the following three models to assess its loan portfolio risk. a. Concentration Limits Model: The FI currently has lent an amount equal to 40 percent of its capital to the commercial sector and does not lend to a firm in any sector that generates losses in excess of 2 percent of capital. The average historical losses in the commercial sector is 5 percent. Using the Concentration Limits Model, you need to explain whether the FI should approve this loan. b. Loan Volume-Based Model: National and MC Financial Institution's loan portfolio allocations are as below. The FI does not want to deviate from the national average by more than 14.72 percent. Using the Loan Volume-Based Model, you need to explain whether the FI should approve this loan. As a senior loan officer at MC Financial Institution (FI), you have a loan application from a irm in the commercial sector. While the loan has been approved on the basis of an individual oan, you must evaluate the loan based on its impact on the risk of the overall loan portfolio. The FI uses the following three models to assess its loan portfolio risk. a. Concentration Limits Model: The FI currently has lent an amount equal to 40 percent of its capital to the commercial sector and does not lend to a firm in any sector that generates losses in excess of 2 percent of capital. The average historical losses in the commercial sector is 5 percent. Using the Concentration Limits Model, you need to explain whether the FI should approve this loan. b. Loan Volume-Based Model: National and MC Financial Institution's loan portfolio allocations are as below. The FI does not want to deviate from the national average by more than 14.72 percent. Using the Loan Volume-Based Model, you need to explain whether the FI should approve this loan

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