What aspect of FHA loans made them particularly attractive to investment companies such as life insurance companies? Group of answer choices a. The increased loan-to-value ratios. b. The reduced default risk. c. The higher interest rates. d The shorter loan terms.
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- What is the advantage of a variable-interest loan? Protects the borrower from rising interest rates Borrower can capitalize on a reference rate decrease Makes it easier for the borrower to plan for future payments Reduces the total interest payments Which of the following tools is used to analyze the industry attractiveness in the credit application process? PESTEL analysis Management analysis Ratios analysis SWOT analysisBanks use gap analysis to measure interest rate risk in their balance sheets. If firm XYZ is said to have a positive gap, this means: Group of answer choices C. Rate-sensitive assets exceed rate-sensitive liabilities B. Long-term assets are funded with short-term liabilities D. Rate-sensitive assets equal rate-sensitive liabilities A. Liabilities reprice before assetsHow can the effect of below-market-rate loans on value be determined using investor criteria?
- When borrowers tend to pay back the loans to bankers earlier, the bank is facing a. Repricing risk b. Yield curve risk c. Basis points risk d. Embedded options riskf. What is the risk (standard deviation of returns) on the bank's loan portfolio of Loans A, B & C, if loan returns are uncorrelated (p = 0)?Interest prepaid by the buyer, which may be used to reduce the stated interest rate the lender charges, are known as ▼ margins. points. payment caps. variable investments.
- A bank wants to implement a loan pricing model and has to look at several variables to consider. Please select the variable that is incorrectly described. a. A profit margin to provide the bank with an adequate return on capital. b. Risk premium to counter the effect of default risk. c. Cost of funding that include the cost of bonds issued. d. Operating costs that include the cost of interest paid to depositors.Which of the following has caused banks difficulty in estimating liquidity needs?A. competition for loans from other financial institutionsB. deregulation of interest rate ceilings on depositsC. competition for loans from nonfinancial institutionsD. a, b, and cWhy is credit risk management important and what are the features of a loan or debt instrument it determines? What is the difference between a spot loan and revolving loan? What is loan commitment? What are the different rates that have replaced LIBOR and in what countries/economic blocs are they used in? What are the borrower and market specific factors that impact the return on a loan for a financial institution? Are higher interest rates a restrictive or stimulative form of monetary policy and explain your answer?
- 1. Explain the difference between debt to income (DTI) ratio and loan to value ratio (LTV). In addition, mention in which scenario the mortgage is likely to be insured, (a) High or low DTI ( b). High or low LTV. 2. Expound on the arguments in favour and against financial innovation. Provide examples of financial innovation within any country of choiceWhy is it that oftentimes banks refuse to lend to many borrowers even though they offer high interest rates? To reduce the exposure to diversification risk. To reduce the exposure to interest rate risk. To reduce the exposure to credit risk. To reduce transactions costs To reduce the free-rider problem.Which of these is NOT likely to lead to more expensive mortgages? O Higher origination loan to value ratios Uncertainty in the ability of banks to access properties through repossession More variable rate mortgages than fixed Longer mortgage duration (or "mortgage term")