What is securitization? What are its advantages to borrowers?What are its advantages to lenders?

Q: In what way does leverage increase the riskiness of a loan?

A: The advantage a financial specialist or investor gets from utilizing debt is called financial…

Q: What is meant by a participation loan? What does the lender participate in? Why would a lender want…

A: Participation loans: It is a type of loan in which the lender shares the net operating income of the…

Q: What is meant by a banker’s acceptance?

A: Money market instruments refers to financial instruments whose maturity period lies between 30 to…

Q: What role do interest rates play in allocating capital to different potential borrowers?

A: Rate of interest : It is the amount paid by a borrower to use the capital borrowed from 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: What are advantages of debt financing?

A: The advantage of debt financing: Ownership remains with the person itself as when the person agrees…

Q: Which are the Borrower’s Rights to Reinstate?

A: The person that takes something from another person with a promise to return back at a specified…

Q: Why might an investor prefer a loan with a lower interest rate and a participation?

A: The amount linked with any amount that is granted as a loan, deposited or borrowed is known as…

Q: What is a financial security?

A: Investors use financial security to be secured financially as they can get some income on periodic…

Q: Debt also can be an advantage. How can be a debt can be advantage?

A: Debt Financing:   It is the money borrowed by the business from outside sources. This source of…

Q: What is credit enhancement, and what effect does it have on debt costs?

A: Credit enhancement represents the strategy that improves the business' credit risk profile. It helps…

Q: What is the compensation for price risk in finance? How do they arise and what issues arise due to…

A: Price risk: Price risk can be defined as the risk that price of a security may reduce. This risk is…

Q: What is a Bankers’ Acceptance?

A: short term market securities: these are the securities which last for one year or less.

Q: How one determines where to borrow or not? What factor into the decision making process?

A: The act of borrowing money or the sum of money borrowed by an individual, company, government, or…

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: 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 unsecured borrowing?

A: Definition:   Liabilities: The claims creditors have over assets or resources of a company are…

Q: Why might the market value of a loan differ from its outstanding balance?

A: Loan outstanding balance: The outstanding balance or loan balance is the remaining amount that is…

Q: What are the advantages to borrowers and risks to lenders for each?

A: Borrowers are the people who borrows the money for any specific purpose. Borrowers pay some amount…

Q: How can we determine the borrowing rate of return?

A: The borrowing rate of return is the return that is charged on the borrowings made by the firms or…

Q: What is off balance sheet financing?  Why do we care about it?

A: Financial statements can be defined as a summary of the financial performance of the business over…

Q: What is the difference between interest rate risk and default risk? How do combinations of terms in…

A: Interest rate risk is the risk of an investment due to changes in interest rate. When market rates…

Q: Why would a lender be willing to make a participation loan?

A: Introduction: Participation loan is a form of loan in which lender is participating in net operating…

Q: Why would an investor-borrower want a participation loan?

A: SOLUTION:- Participation loan: it is a kind of loan in which lender participates in the net…

Q: What’s the difference between simple interest and add-on interest as bankers usethese terms?

A: Add on interest is calculated by totaling the principal borrowed and interest and then multiplying…

Q: How important is the ability to borrow money from an individual and what is the primary risk of…

A: Borrowing money is the act of obtaining money from the lender in order to fulfill a financial goal…

Q: how FHA buydown loans are structured?

A: Buydown loan is a type of loan in which lower interest rate is charged to the buyer. In such type…

Q: What do we call the cost that a borrower must payto use debt capital?

A: Debt capital is the capital that is borrowed from various financial institutions or other lenders…

Q: Does collateral reduces moral hazard by borrowers? Why?

A: Introduction: A collateral asset is an asset that a lender accepts as payment for a loan. Depending…

Q: What are the benefits of using debt security?

A: The financial instruments which are bought by investors, or corporations, or mutual funds, are…

Q: Why should an investor use debt?

A: Debt investments represent the loan which an investor lends to earn interest along with the…

Q: Types of seller financing?

A: Seller Financing: A real estate or property agreement under which the mortgage process is managed by…

Q: is the potential impact of long-term borrowing?

A: Long-term borrowings: Long term borrowings help companies to attain their long term financial…

Q: Explain the Market Value of a Loan?

A: The market price of Debt refers to the value investors would be willing to shop for a company’s debt…