How is your borrowing power affected when you are considered a "high risk"?There is a good chance that you will receive better loan terms and low interest rates.You might not qualify for a loan to buy a home, car, etc.You will pay lower interest rates.None of the above.

When a borrower is considered high risk, it is due to the bad credit history of the borrower. There…

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Business/Professional Ethics Directors/Executives/Acct

8th Edition

ISBN:9781337485913

Author:BROOKS

Publisher:BROOKS

Chapter8: Subprime Lending Fiasco-ethics Issues

Section: Chapter Questions

Problem 6.1EC

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How is your borrowing power affected when you are considered a "low risk"? There is a good chance that you will receive better loan terms and low interest rates. You might not qualify for a loan to buy a home, car, etc. You will have to pay higher interest rates. None of the above.
What does a high credit score mean? The person is considered a higher risk and less likely to pay off their debts; has bad money habits. The person is likely to pay back their debts and has good money habits. The person has a large amount of credit. None of the above.
What does a low credit score mean? The person has a low amount of credit. The person is likely to pay back their debts and has good money habits. The person is considered a high risk and is less likely to pay off their debts; has bad money habits. None of the above.
What are the major flaws with NPV? What are the major flaws with IRR? If you are going to a bank and trying to get a loan, which is the best method to use (NPV, IRR, Payback period)?
Lenders use your credit score? To criticize your financial habits, to punish you for having good financial habits, to understand how likely you are to play back the money you borrow, to see if you’ve earned your degree
Most credit cards charge a relatively high rate of interest, yet many people carry them, including people who would be considered low-risk borrowers. Our discussion of adverse selection said that low-risk borrowers should have been discouraged from these. What gives?
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 these statements is true? A)There is no reason to pay off a loan early B) when shopping for a loan, you need to compare only APRs C) the more you owe, the higher your interest payment will be D) you can save money by making the smallest down payment the lender will allow
Consider two loans that are otherwise identical, except that Loan A has a higher chance of borrower default and Loan B has a lower chance of borrower default. Which loan would you expect to charge more interest-all else equal-and why? O Loan A would charge more interest because it is less risky than Loan B. O Loan A would charge more interest because it is riskier than Loan B. O Loan B would charge more interest because it is less risky than Loan A. O Loan B would charge more interest because it is riskier than Loan A.
A borrower who takes out a loan usually has better information about the potential returns and risks of the investment projects he plans to undertake than the lender does. This inequality of information is called O a. adverse selection. b. moral hazard. C. asymmetric information. O d. noncollateralized risk.
If a consumer with a relatively low credit score applied for a loan from your bank, what other criteria might you consider before deciding to grant a loan?
Which explanation BEST describes John Maynard Keynes' "The Paradox of Thrift?" a. Individuals should reduce spending to cut debt. b. When an individual reduces her or his own spending, he or she reduces someone else's revenue. C. Individuals should borrow money during uncertain economic times. d. Individuals should only borrow money when times are good.

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How is your borrowing power affected when you are considered a "high risk"? There is a good chance that you will receive better loan terms and low interest rates. O You might not qualify for a loan to buy a home, car, etc. You will pay lower interest rates. O None of the above.