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 of the following conditions indicates that a loan assumption is least advisable? An existing…
A: Loan Assumption In a simple term loan assumption which indicates that financial obligation which was…
Q: Why lenders assume no risk in granting loan to the government though the return of this type of loan…
A: Loans are raised by governments to meet the financing requirements of the country.
Q: Which one of the following statements regarding the loans market is false? a) The principal-agent…
A: Please see the next step for the Answer
Q: Which of the following does not relate to credit risks? Select one: A. Credit risk is the…
A: Before answering the question, we should understand what Credit Risk means Credit Risk: It is the…
Q: How can the effect of below-market-rate loans on value be determined using investor criteria?
A: Below market interest loan is the loan on which interest rate is charged less than the current…
Q: The cost of marginal bad debts is found by taking the difference between the levels of bad debts…
A: Bad debt refers to the loans or amount that can no longer be recovered as the person has lost all…
Q: What is the difference between a credit sale (with a higher price as compared to the cash sale) and…
A: The amount of Sales made in credit has to be collected after certain period of time. In case of cash…
Q: Which of the following is not a way in which banks lend short-term unsecured loans? Through…
A: Banks offer and provide short term loans which are unsecured to borrowers. It has been explained in…
Q: Because banks accept short term fixed rate deposits they prefer to give loans where loan rate floats…
A: Fixed interest rates are 1%-2.5% higher than the floating interest rate. The increase and decrease…
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: How can effective APR differ from nominal interest? A. Effective APR takes loan fees into account,…
A: Nominal interest rate is the stated interest rate on a loan. It is the interest rate which does not…
Q: Most lenders do not require collateral for short-term financing.; True or False
A: Collateral refers to something that is pledged in order to repay a loan and which can be forfeited…
Q: what are two types of credit
A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…
Q: Assuming the borrower is in no danger of default, under what conditions might a lender be willing to…
A: There can be majorly two possibilities under which a lender may accept a lesser amount than that of…
Q: What is the advantage of a variable-interest loan? Protects the borrower from rising interest rates…
A: Cost Accounting: It is the process of collecting, recording, analyzing the cost, summarizing cost,…
Q: Banks can hedge the credit risk of their mortgage loans by buying credit default swaps. (Think about…
A: The risk or uncertainty that is present in an investment transaction that the investee will not…
Q: Which of the following is NOT a reason for sales discounts to be offered to the debtors(customers)?…
A: Sales Discount :- Sales discount is offered to debtors to encourage earlier settlement of debts by…
Q: There is a formula that will find the APR, i, of a single payment loan but not for a series of…
A: The term “annual percentage rate (APR)” refers to the annual rate of interest charged to borrowers…
Q: Canceling the original loan and signing a new loan agreement with different terms to settle troubled…
A: The question is related to Canceling the original loan and signing a new loan agreement with…
Q: Why might a lender prefer a loan with a lower interest rate and a participation?
A: One meaning of loan participation is multiple lenders participating in lending to the same borrower.…
Q: What is MOST TRUE of DEFAULT RISK on a mortgage loan? It is always lower with lower interest rates.…
A: Default risk is the risk that a lender assumes when a borrower fails to make mandatory debt…
Q: What are the main differences between ARMs and FRMs loans? You need to highlight the differences in…
A: Loan which are provides to the borrower either in Adjusted Rate of Mortgage or Fixed Rate of…
Q: What is the indifference point under the net present value? When would there be a discount on a…
A: SOLUTION- NET PRESENT VALUE = PRESENT VALUE OF CASH INFLOW - PRESENT VALUE OF CASH OUTFLOW.
Q: a bank that makes most of its long term loans at fixed interest rates is reducing ceedit risk and…
A: The banks can make a loan with both of the terms i.e short term loan or long term loans.
Q: What are some of the ways to estimate bad debts?
A: There are 2 basic methods namely 1. Percentage of sales method 2. Percentage of receivable method…
Q: Do you think that IFRS 9 may make loans more expensive for borrowers? Implementation of IFRS 9 will…
A: IFRS 9 follows the expected credit loss model, which regulated the provisioning to be done by the…
Q: in why the covered interest rate parity (CIP) condition can be violated during the financial crisis…
A: Covered interest rate parity says changes in interest rate and changes in exchange rate should be in…
Q: Δ%(MV) = -MD*Δr When we use this equation to evaluate a loan, this equation does not totally…
A: The values of the loans change when there is a change in the interest rates. The duration helps to…
Q: Which of the following decreases the likelihood of bank failures by keeping banks from making risky…
A: Option d is correct.
Q: Which type of information asymmetry explains why bad credit risks are more likely to seek bank…
A: Adverse selection, as a rule, alludes to a circumstance where dealers have data that buyers do not…
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 spontaneous sources of short-term financing and unsecured sources of short-term loans
A: The source of funds which are having a zero cost is termed as a spontaneous source of funds. It is…
Q: What are the major flaws with NPV? What are the major flaws with IRR? If you are going to a bank and…
A: Major flaws with NPV:Requires an assumption of discount rate which is not directly observable in the…
Q: Which statement best describe subprime loans? a.Loan issued to high-risk borrowers with poor credit…
A: Subprime loans are the types of loans which carries interest rate of more than prime rate. These are…
Q: What are mortgage discount points? When does it make sense to pay points on a loan? How can a…
A: Mortgage discount point are all such points which will be reducing the total amount of fees which an…
Q: the financial institution do to lower these risks
A: The main risk is that interest rates will rise. Therefore, banks have to pay higher interest rates…
Q: Which of the following is not a characteristic of receivables? Select the correct response: The…
A: Option b, c and d are the characteristics of receivables. Option a is the characteristic of an…
Q: Which of the following is not likely cause of Default? Select one: a.Lack of compliance with loan…
A: The term “Default” in terms of a loan refers to the failure of repayment of the loan by the borrower…
Q: How does a lower credit rating affect borrowers lenders and financial institution? What are the…
A: The credit rating is a measurement of the creditworthiness of the borrower. In the capital market,…
Q: When the default risk is high, ___. the debtor charges high interest the debtor earns more the…
A: Default risk is the risk faced by an investor or lender that the borrower becomes unable to pay the…
Q: Discuss the two theories of mortgage default. What are the most important factors that influence the…
A: Mortgage Default In simple term mortgage default which is described as default from the borrower to…
URGENT
How does high interest rate and setting ceiling on loans (limited credit) compensate for the possibility of defaulting?
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Solved in 2 steps
- What does default mean? Does it occur only when borrowers fail to make scheduled loan payments?From the standpoint of the borrower, is long-term or short-term credit riskier? Explain. Would it ever make sense to borrow on a short-term basis ifshort-term rates were above long-term rates?Please answer the following questions what are two types of credit what is a security interest who is the debtor and creditor what happens if the debtor defaults what type of transaction requires a financing statement
- What is MOST TRUE of DEFAULT RISK on a mortgage loan? Group of answer choices It is always lower with lower interest rates. It increases with greater leverage. It increases with a lock-out provision. It does not effect the borrower due to lack of recourse.what are two types of credit what is a security interest who is the debtor and creditor what happens if the debtor defaults what type of transaction requires a financing statementWhen the default risk is high, ___. the debtor charges high interest the debtor earns more the creditor earns less the creditor charges high interest Please answer immediately thanks :)
- Which of the following situations are likely to result in higher loan defaults? Mortgages are held by originating institutions in their portfolios. Borrowers have higher equity in their homes. Lenders who require documentation of income, liabilities and asset ownership. Borrowers with low credit scores.Which of the following does not relate to credit risks? Select one: A. Credit risk is the possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual obligations B. Credit risk also describes the risk that an insurance company will be able to pay a claim. C. It refers to the risk that a lender may not receive the owed principal and interest D. Credit risk describes the risk that a bond issuer may fail to make payment when requested E. Credit risk is the possibility of losing a lender takes on due to the possibility of a borrower not paying back a loanDescribe a short-term financing option and discuss the advantages and disadvantages. Is there a limit to the amount of a short-term bank loan?
- Explain Negative Amortization Loans with example?Which of the following does not relate to credit risks? a. Credit risk is the possibility of losing a lender takes on due to the possibility of a borrower not paying back a loan b. It refers to the risk that a lender may not receive the owed principal and interest c. Credit risk also describes the risk that an insurance company will be able to pay a claim. d. Credit risk is the possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual obligations e. Credit risk describes the risk that a bond issuer may fail to make payment when requested
