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Question
A regression of sectoral loan losses against total loans losses, both measured as a percentage of total loans, of a bank results in the following beta coefficients for the real estate (RE) and commercial (CL) loan variables: βRE = 1.2, βCL = 1.6. The intercept for both regressions is zero.
The results indicate that for the bank
A. the real estate loan losses were systematically lower than the total loan losses.
B. the real estate loan losses were systematically higher than the total loan losses.
C. the commercial loan losses are systematically higher than the total loan losses.
D. Answers A and C.
E. Answers B and C.
Answer
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