What are the main differences between ARMs and FRMs loans? You need to highlight the differences in terms of allocation of risk between borrowers and lenders.
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- What is the role of transferring credit risk? What is the various instruments used to transfer this risk?Differentiate between interest rate risk and default risk and explain how combinations of terms in ARMs affect the allocation of risk between borrowers and lenders.What is the difference between interest rate risk and default risk? How do combinations of terms in ARMs affect the allocation of risk between borrowers and lenders?
- How to define credit risk and how to limit that risk.what basic criteria are commonly used in evaluating credit risk?Risk mitigation tools used specifically by secured lenders are least likely to include detailed assessments of a borrower's: A) willingness to pay. B) collateral. C) loan guarantees. D) credit enhancements.
- Define Loan Refinancing?Which of the following statements is most correct? * An aging schedule is used to determine what portion of customers pay cash and what portion buy on credit. If a firm changes its credit terms from 1/20, net 40 days, to 2/10, net 60 days, the impact on sales can't be determined because the increase in the discount is offset by the longer net terms, which tends to reduce sales. Aging schedules can be constructed from the summary data provided in the firm's financial statements If a firm's volume of credit sales declines then its DSO will also decline. The DSO of a firm with seasonal sales can vary. While the sales per day figure is usually based on the total annual sales, the accounts receivable balance will be high or low depending on the season.Why might the market value of a loan differ from its outstanding balance?
