Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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1. Loans that are to be securitized are passed on to ____ _ _ _ _ _ ___. This helps ensure that if the lender goes bankrupt , it does not affect the credit status of the pooled loans .
A. the originator
B. a special - purpose entity
C. the trustee
D. a servicer
E. the credit enhance
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- QUESTION 1 Which if the following is not true of the 5Cs in evaluating credit quality Character refers to the integrity and honesty of the borrower and applies to both individuals and companies Capital refers to the savings or wealth of the borrower as an additional source of income to repay the loan Collateral refers to assets that are pledged to lender Capacity refer to external factors including the state of economy that can impact the borrower’s source of income. QUESTION 2 Which of the following is not true? Firm A Firm B Industry Benchmark 2018 2019 2020 2018 2019 2020 2018 2019 2020 ROA 9.14% 9.50% 9.90% 8.11% 8.16% 8.19% 8.11% 8.14% 8.15% ROE 22.45% 22.95% 23.45% 19.65% 19.88% 20.12% 19.95% 20.55% 21.00% TIE 1.75 1.65 1.55 2.75 2.90 3.05 2.25 2.30 2.50 CR 3.25 3.66 3.75 2.55 2.65 2.75 2.40 1.45 2.50 EPS…arrow_forwardWhich of the following is not use to assess whether credit should be extended to a household? a. The amount of income earned. b. The amount of debt outstanding. c. The history of timely repayments of debt owed. d. Whether the loan is secured by an asset. e. All of the above are used to assess credit.arrow_forwardExplain the 5 C’s that creditors look for in borrowers. Which ones are the most important? Which ones do not depend on the individual borrower?arrow_forward
- With credit tranching, the subordinated tranches may absorb credit losses as they occur. Select one: True Falsearrow_forwardIn a troubled-debt situation, why might the creditor grant concessions to the debtor?arrow_forwardWhich of the following is an example of faithful representation? A Showing lease payments as a rental expense B Being prudent by recording the entire amount of a convertible loan as a liability C Creating a provision for staff relocation costs as part of a planned restructuring D Recording a sale and repurchase transaction with a bank as a loan rather than a salearrow_forward
- Which of the following security instruments, if any, does not allow the debtor the right of redemption upon default? a. Mortgage foreclosure by "action and sale" b. "Strict foreclosure" of mortgage c. Debtors have a right to redeem property under all of these security instruments. d. Deed of trust e. Mortgage foreclosure by "power of sale"arrow_forwardThe agency problem in the mortgagė markets was due to the business model. O 1) "pass-through" O 2) business-as-usual 3) securitization O 4) originate-to-own O5) None of the answers are correctarrow_forwardQuestion 5 Collateral is a valuable asset that is pledged to ensure loan payments. If you fail to repay the loan, the creditor may take your pledged asset. True Falsearrow_forward
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