3. As loan portfolio manager you choose three kinds of loans, real estate loans (RE), credit card loans (CC), and commercial and industrial (C&D) loans. Based upon past performance you have the following: Loan type Return=R Risk=0 RE 0.1 0.007 CC 0.12 0.01 C&I 0.15 0.0125 The correlation coefficients are in the table below RE CC C&I RE 1 0.4 -0.1 CC 0.4 1 HELLO 0.25 C&I -0.1 0.25 Given a risk-free return of R=3% if your goal is to maximize 6 = R(port)-R where (port) R(port) is the expected portfolio retum and (port) is the standard deviation of the portfolio then the weights you should choose for the three types of loans are: weight(RE) b. weight(CC) weight(C&D) Suppose your firm has a maximum equity loss rate of 5% on any investment that they make. The loss rate on RE loans that default is 25%, the loss rate on CC loans is 50%, and the loss rate on C&I loans is 40%. Calculate the concentration limits for the three loan types. Concentration limit (RE) Concentration limit (CC)= Concentration limit (C&D) 3. As loan portfolio manager you choose three kinds of loans, real estate loans (RE), credit card loans (CC), and commercial and industrial (C&D) loans. Based upon past performance you have the following: Loan type Return=R Risk=0 RE 0.1 0.007 CC 0.12 0.01 C&I 0.15 0.0125 The correlation coefficients are in the table below RE CC C&I RE 1 0.4 -0.1 CC 0.4 1 HELLO 0.25 C&I -0.1 0.25 Given a risk-free return of R=3% if your goal is to maximize 6 = R(port)-R where (port) R(port) is the expected portfolio retum and (port) is the standard deviation of the portfolio then the weights you should choose for the three types of loans are: weight(RE) b. weight(CC) weight(C&D) Suppose your firm has a maximum equity loss rate of 5% on any investment that they make. The loss rate on RE loans that default is 25%, the loss rate on CC loans is 50%, and the loss rate on C&I loans is 40%. Calculate the concentration limits for the three loan types. Concentration limit (RE) Concentration limit (CC)= Concentration limit (C&D)