A Regression of Sectoral Loan Losses Against Total Loans Losses

Multiple Choice

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: β_RE = 1.2, β_CL = 1.6.The intercept for both regressions is zero. The results can be interpreted as

A) If the total loan losses of the bank measured as a percentage of total loans is 2 percent, the losses in the real estate sector, measured as a percentage of total loans, is 1.2 percent.
B) If the total loan losses of the bank measured as a percentage of total loans is 2 percent, the losses in the commercial sector, measured as a percentage of total loans, is 3.2 percent.
C) If the total loan losses of the bank measured as a percentage of total loans is 2 percent, the losses in the commercial sector, measured as a percentage of total loans, is 6.4 percent.
D) If the total loan losses of the bank measured as a percentage of total loans is 3 percent, the losses in the commercial sector, measured as a percentage of total loans, is 5.2 percent.
E) If the total loan losses of the bank measured as a percentage of total loans is 3 percent, the losses in the real estate sector, measured as a percentage of total loans, is 4 percent.