A manager decides not to lend to any firm in sectors that generate losses in excess of 3% of capital.

a) If the average historical losses in the automobile sector total 10 percent, what is the maximum loan a manager can lend to firms in this sector as a percentage of total capital?

b) If the average historical losses in the mining sector total 12 percent, what is the maximum loan a manager can lend to firms in this sector as a percentage of total capital?