Lending Strategy Risk Assessment
Two banks each have $1 million to lend. Based on the principle of managing lending risk through the number of borrowers, analyze the two strategies below. Which bank is likely to have a more stable and predictable overall return on its loans? Justify your reasoning.
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Economics
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Ch.6 The financial sector: Debt, money, and financial markets - The Economy 2.0 Macroeconomics @ CORE Econ
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Lending Strategy Risk Assessment
A commercial bank has $10 million to lend. It is considering two strategies: Strategy A involves lending the entire amount to a single large corporation, while Strategy B involves lending $10,000 to each of 1,000 different small businesses. Assuming the expected rate of return is similar for both strategies, which of the following statements best analyzes the risk associated with these strategies?
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