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Assume that the firm chosen by you would like to borrow an AU$ 1 million 3 - year loan. Suppose that you approved the loan

Assume that the firm chosen by you would like to borrow an AU$

1

million

3 -

year loan. Suppose that you approved the loan one year ago. Now that the borrowing firm's financial situation has deteriorated, combing the industry

(

retail

)

risk of the borrowing firm, how can the bank hedge this increased credit risk?

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