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a) Briefly discuss the problems associated with using modern portfolio theory for measuring a FIs aggregate credit risk exposure. b) Consider the coefficients of Altmans

a) Briefly discuss the problems associated with using modern portfolio theory for measuring a FIs aggregate credit risk exposure.

b) Consider the coefficients of Altmans Z-score. Comment on the size of the coefficients and explain which ratios appear to be the most important in assessing the creditworthiness of a loan applicant. Also, comment upon the key limitation of this method.

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