Q: What does default mean? Does it occur only when borrowers fail to make scheduled loan payments?
A: Default is the risk involved in providing the mortgage loan. Default indicates the incapability of…
Q: Which are the major problems facing a lender when reviewing a loan request made by a borrower?
A: Introduction: A loan agreement is nothing but an agreement between a lender and the borrower which…
Q: what are the Benefits and Costs of Delinquency In the field of lending
A: Whenever a customer does not meet their obligation, a cost aries as the payment on the credit sales…
Q: What is the status of a lender on collateral if they fail to perfect their security interest? What…
A: A security interest in an asset that cannot be claimed by any other party is called a perfected…
Q: Which of the following is true of an unsecured loan? A. They are exclusively for cars, houses, and…
A: Loan can be defined as money that somebody lends other person in exchange of some interest that is…
Q: Describe some of the motives and mistakes made by the mortgage brokers?
A: To market and attract new borrowers for the lenders Assessment of credit history of the borrowers.…
Q: What is the difference between a line of credit and a short-term loan?
A: Short term loan: A loan is borrowed money that is to be paid back along with the interest. A…
Q: For a creditor; how is a loan impairment recorded?
A: Creditors: They are the outside entities to whom the business owes money for any product or a…
Q: When might a borrower want to have another party assume his liability under a mortgage loan?
A: There are basically two conditions when a borrower might want to have a third party:
Q: Credit card debt and commercial loans are easily among the most significant and familiar financial…
A: Credit card debt is a type of bank overdraft wherein the borrower needs to pay an interest amount…
Q: The two types of personal loans are Installment Loans and Demand Loans. True False
A: Introduction : In simple words, personal loans refers to the loans which are given to the borrower…
Q: As long as you have a strong reason for taking a loan, there is no need to understand the terms of…
A: Understanding the terms in a loan agreement is vital. Loan agreements are an critical a part of…
Q: For what items may a lender require escrow accounts from a borrower?
A: Escrow account is the third party account in which securities or assets are kept until the…
Q: Why should you and should not sign a personal guarantee for a business loan?
A: The personal guarantee for a business loan refers to the assurance by the company or a business…
Q: Why is interest paid on amounts borrowed from banks and other lenders considered to be anoperating…
A: Cash Flow Statement: Cash Flow Statement is a fundamental financial statement that renders valuable…
Q: All of the following concepts with regard to the evolving title theory of mortgage lending are true…
A: mortgage is arranged loan in which lender is owner of property till mortgage amount are paid if loan…
Q: What are some possible agency conflicts between borrowers and lenders?
A: Answer: Agent: An agent is one who provides work on principal’s behalf. Principal authorizes agent…
Q: What does “assignment” mean and why would a lender want to assign a mortgage loan?
A: Mortgage assignments refer to a document that shows that a mortgage is transferred from the original…
Q: A(n) _________ is a lender, seller, or any other person in whose favor there is a security interest.…
A: Following are the definitions: Unsecured Creditor: A creditor not having the benefit of security…
Q: Explain Issuance of loans to unworthy entities with examples
A: Issuance of loan to unworthy entities means granting of loans to the entities having a poor…
Q: Does Loan Meet Written Loan Policy and How Would Loan Be Affected By Changing Laws and Regulations…
A: Lenders utilise the five C's of credit to assess the creditworthiness of potential borrowers. The…
Q: Related to ethics and contracts, why do payday loans appear to be an ethical issue?
A: Payday loans are small ticket loans for a short duration. The borrower pays back the loan when he…
Q: Why can’t bank lend without a written loan policy? Explain in detail.
A: Lending procedure: There are certain steps that are followed in the procedure. this includes the…
Q: Describe some of the motives and mistakes made by the mortgageoriginators?
A: The mortgage broker did not fix a target. Without a clear aim for the year, couriers can transfer…
Q: What is meant by a “purchase-money” mortgage loan? When could a loan not be a purchase-money…
A: A purchase-money mortgage loan is a loan that home sellers provide to the buyers of the home. Buyers…
Q: Explain how an installment loan differs from revolving credit in terms of risk and the nature of the…
A: Installment credit is a type of loan in which the borrower receives a defined, or limited, sum of…
Q: What are the factors that you need to consider in applying for a loan? Why is it important to…
A: When applying for a loan one need to consider several factors at play. Some of them are quantitative…
Q: How does compound interest affect the loans you undertake? For example, how would this affect…
A: Interest is an additional value which is charged on borrowed or deposited amount. Interest can be an…
Q: What does it mean when a lender accelerates on a note? What is meant by forbearance?
A: Promissory note is written by the borrower and sent to the lender. In promissory note, borrower…
Q: Explain the 5 C’s that creditors look for in borrowers. Which ones are the most important? Which…
A: A borrower is an individual or an institution that borrows money or loan from the lender for a…
Q: Which of the following is a FALSE statement? A mortgage does not give the lender a right to be paid…
A: A mortgage is an agreement between banks or other persons wherein money is lent to the borrower by…
Q: True or false? Interest received on loans made to borrowers is an example of an investing activity.
A: The investing activities of the cash flow statement record the amount incurred for purchasing the…
Q: why loan officer prefer accrual basis accounting
A: The financial statement of a firm can be prepared based on accrual basis of accounting or cash basis…
Q: When do you considered a loan, receivables are impaired?
A: Impairment refers to diminution in realizable value of the asset. It may be due to various factors…
Q: What are the stages and processes for resolving bad loans? note: include a reference
A: Bad Loans: When a loan made by a bank cannot be recovered, either partially or fully, it is termed a…
Q: When loans are obtained from the bank or lending institutions, the accounts receivable may be…
A: Loan means the amount taken from another person to be repaid back with interest.
Q: How could borrowers take advantage of lenders if UCC-1s did not exist?
A: UCC-1 statement is provided by the creditor when the debtor does not pay the interest and the…
Q: Question 5: Collateral is a valuable asset that is pledged to ensure loan payments. If you fail to…
A: Collateral is an asset which is pledged by the borrower to the lender to give a security to the…
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![1. Loans typically come with restrictions on
the borrower called
are intended to protect the lender
2. According to SIFMA's Capital Markets
Factbook, what percentage of the money
raised by US corporations in 2020 in capital
markets came from bond issuance? [Hint: No
need to go to the factbook. Check the
readings at the very top of the Bonds
subsection]
Select an answer and submit. For keyboard
navigation, use the up/down arrow keys to
select an answer.
а. 5%
b. 9%
с. 50%
d. 77%
е. 85%
3. According to the podcast episode linked in
the readings, the first government bonds ever
issued were by the Venetian government and
were called the
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- Suppose the Federal Reserve sells a $3000 bond, and the reserve ratio maintained by all private banks is 20%. Assume that all loans are fully redeposited (zero “cash drains”) and that all deposits are checkable deposits. Determine the effect of the bond sale on total loans and deposits in the private banks. Explain in detail how these changes would occur. Illustrate the total result of the effects in part (1) using balance sheets for the consolidated private banks and the Federal Reserve, respectively. Discuss how the effects in part (1) would be different if: (i) the reserve ratio was 25% instead of 20%; (ii) a certain portion of loans were held as cash outside banks instead of being redeposited in the banks.1. How would you define corporatebonds? Explain in your own wordswhat Bonds issued at Par, at aDiscount, and at a Premium are.2. How would you explain thedifference between bank loans andissuing corporate bonds? In youropinion, which of the fundingmethods is more attractive to acompany?Assume a bank can invest in a government bonds at a risk-free rate of 5.6%. Alternatively, it can invest in a corporate bond with a default probability of 6.5%. If the issuer defaults, the bank expects to recover 28.3% of the investment. A risk-averse bank that requires an additional premium of 2.9% as a result of risk aversion would be indifferent between investing in the government bond and the corporate bond if the corporate bond offers a rate of __________. Calculate the answer by read surrounding text. %. Round to the nearest 0.01%, drop the % symbol. E.g., if your answer is 0.10245 or 10.245%, record it as 10.25.
- Suppose a company is choosing between bank loans and bonds. The interest rate in the bank loan is 3.5%, and an investment bank predicted that the company will pay close to 4% to issue a bond with the same maturity. In addition, fees are estimated to be higher for the bond issuance than for the bank loan. Explain why this company may still decide to issue the bond rather than borrowing through a bank.Loptech, a technology firm, wants to issue bonds for investment purposes. Loptech has one of the best credit ratings in the industry. Market rates for debt instruments average at .5% interest. Based on its credit rating, Loptech would likely sell bonds that pay _____. A. Indeterminable with current information B. 0.25% C. 0.5% D. 0.75%Mr. Jackson is considering investing in corporate bonds. He has talked to an investment analyst who has advised him to choose between company A or company B bonds. The possible rates of return for the two bonds, which are subject to the state of the economy are given below: State of theeconomy Probability for State ofthe economy Possible rate of returnfor Company A bond Possible rate ofreturn for CompanyB bond Expansion 0.2 17% 20% Normal 0.1 13% 15% Recession 0.4 10% 11% Required:i. Calculate the expected return for each corporate bond ii. Calculate the variance and standard deviation for each bond. iii. Compute the coefficient of variation for each bond iv. Advice Mr. Jackson on the best bond to invest in.
- As you confirmed there are errors in the solutions.Can you please provide clear answers for B,C,D. Question 3. Bond Consider a bank with the following balance sheet (M means million): Assets Value Duration of the Asset Convexity of the Asset5yr bond bought at a yield of 3.4% (lending money) $550M 4.56212.02612yr bond bought at a yield of 4% (lending money) $800M 9.45353.565 Liabilities Value Duration of the Liability Convexity of the Liability2yr bond sold at a yield of 2.4% (borrowing money) $300M 1.941 2.3844yr bond sold at a yield of 2.8% (borrowing money) $500M 3.759 8.206 a) Calculate the equity (total asset – total liability) to asset ratio of the bank (Hint: equity to asset ratio = total equity/total asset) b) Calculate the duration and convexity of the both asset and liability sides; c) If the interest rates go up by 1%, using the duration and convexity rule to determine the net worth of the bank and the equity to asset ratio; d) In c)’s scenario, to maintain the equity to…Mark buys a financial asset from the DBA. This financial asset is an instrument of short term borrowing. He hasbought it because he doesn’t want to take risk and wants an assured return. This instrument is promissory note. It ishighly liquid. The instrument is also known as zero coupon bonds. On this instrument it is written T-91. Based onthe above case study, answer the following:a. Which financial asset is indicated in the above case?b. On whose behalf does the DBA issue this instrument?c. Why is this instrument called as the zero coupon bond?d. What does T-91 denote here?e. What is the minimum amount for which this instrument bond?As an alternative, you are contemplating to incorporate and issue a bond to raise the capital instead of borrowing from the bank. Required part C Is there an advantage to issuing bonds rather than borrowing money from the bank? Suppose you decide to go this route and you issue a $130,000, 9%, 5-year bonds for $115,375 when the market rate is 12%. The bonds pay interest semi-annually. Prepare an amortization table for the first three payments. The premium is amortized using the straight-line method. Prepare journal entries for the following transactions. July 1, 2021: entry to record issuing the bonds. 31, 2021: entry to record payment of interest to bondholders. 31, 2021: entry to record amortization of premium.
- Fixed-income securities consist of debt instruments and preferred stock. Bonds are debt securities in which a borrower promises to pay a specified interest rate and principal at a future date. Which of the following types of bonds have the least default risk? Municipal bonds Corporate bonds Treasury bonds Based on the information given in the following statement, answer the questions that follow: In July 2009, Hungary successfully issued 1 billion euros in bonds. The transaction was managed by Citigroup. Who is the issuer of the bonds? Citigroup The Hungarian government Hungary Bank What type of bonds are these? Government bonds Corporate bonds Municipal bondsAssuming the government is selling a government bond to fight COVID-19, and at the same time, ASHANTI Goldfields Company is selling a corporate bond to increase its production. Under what conditions will the production-linked corporate bond be oversubscribed at the expense of the government bond. Explore all possible scenarios. [Not more than one-page]50- Which of the following are issued by large commercial banks that can be bought and sold among investors and carry a fixed interest rate? a. Eurodollar CD b. Certificate of Deposits c. Treasury Bills d. Commercial Papers
