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Over the past 10 years, a bank has experienced the following loan losses on its C\&I loans, consumer loans, and total loan portfolio. Using regression analysis on these historical loan losses, the bank has estimated the following: XC=0.002+0.8XLandXh=0.003+1.8XL , where XC= loss rate in the commercial sector, Xh= loss rate in the consumer (household) sector, and XL= loss rate for its total loan portfolio. (1) If the bank's total loan loss rates increase to 10 percent, what are the expected loss rate increases in the commercial and consumer sectors? Commercial Sector =8.0%; Consumer Sector =18.0% Commercial Sector =18.3%; Consumer Sector =8.2% Commercial Sector =8.2%; Consumer Sector =18.3% Commercial Sector =18.0%; Consumer Sector =8.0% Assume the same information as in the previous question Question Set 4>. (2) In which sector should the bank limit its loans and why? Commercial Sector ; The loss rates are systematically higher than the loss rates for the total loan portfolio. None of the options. Consumer Sector ; The loss rates are systematically lower than the loss rates for the total loan portfolio. Consumer Sector : The loss rates are systematically higher than the loss rates for the total loan portfolio

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