A regression of sectoral loan losses against total loans losses, both measured as a percentage of loans, of a bank results in the following beta coefficients for the real estate (RE) and commercial (CL) loan variables: bRE = 1.2, bCL = 0.5. The intercept for both regressions is zero. According to the Modern Portfolio Theory, the results indicate that for the bank

Select one:

a.Both sectors have the same degree of systematic default risk and benefit of diversification.

b.The real estate loans have a higher systematic default risk and thus higher benefit of diversification.

c.The real estate loans have a higher systematic default risk and thus lower benefit of diversification.

d.The commercial loans have a higher systematic default risk and thus lower benefit of diversification.

e.The commercial loans have a higher systematic default risk and thus higher benefit of diversification.