= If the average historical losses in the mining sector total 15 percent, what is the maximum loan a manager can make to a firm in this sector as a percentage of total capital? An FI has set a maximum loss of 2 percent of total capital as a basis for setting concentration limits on loans to individual firms. If it has set a concentration limit of 25 percent of capital to a firm, what is the expected loss rate for that firm? Explain how modern portfolio theory can be applied to lower the credit risk of an FI’s portfolio.