Question 1

In the context of the KMV Credit Monitor Model, the market value of a risky loan made by a lender to a borrower can be expressed as: A)F(r) = Be^-^i/r[(1/d)N(h₁) + N(h₂)] B)F(r) = Be^-^ir[(1/d)N(h₁) + N(h₂)] C)F(r) = Be^-^ir[(1/d)- N(h₁) + N(h₂)] D)F(r) = Be^-^ir[(1/d)N(h₁) *N(h₂)]

Accepted Answer

The answer of In the context of the KMV Credit...

Question 2

Consider the following formula for calculating the contractually promised gross return on a loan k, per dollar lent: (1 + k) = 1 + [f + (BR + m)]/ {1 - [b(1 - R)]}.Which of the following statements is true?

Accepted Answer

A) The denominator is the promised gross cash inflow to the FI per dollar. 
B) The denominator reflects direct fees plus the loan interest rate consisting of both, the base lending rate and the credit risk premium. 
C) The formula ignores present value aspects. 
D) The FI's net benefit from requiring compensating balances must consider the benefits of holding additional non-interest bearing reserve requirements.

Question 3

Consider the following scenario: an FI charges a 0.5 per cent loan origination fee and imposes a 10 per cent compensating balance requirement to be held as non-interest bearing demand deposits.It further sets aside reserves held at the central bank.The value of these reserves is 15 per cent of deposits.What is the base lending rate if the credit risk premium is 3.055 per cent and the ROA on the loan is 17 per cent?

Accepted Answer

A) 11.5 per cent 
B) 13.945 per cent 
C) 12 per cent 
D) 20.055 per cent

Question 4

Loan to value ratio is the:

Accepted Answer

A) loan amount divided by the book value of the property to be mortgaged. 
B) loan amount divided by the perceived value of the property to be mortgaged. 
C) investment amount divided by the appraised value of the property to be mortgaged. 
D) loan amount divided by the appraised value of the property to be mortgaged.

Question 5

A loan provided by a group of FIs as opposed to a single lender is called:

Accepted Answer

A) a joint loan. 
B) project finance. 
C) a syndicated loan. 
D) a multiple loan.

Question 6

In its simplest form the rate on a loan is set as the base lending rate plus a credit risk premium.

Accepted Answer

A) True 
 B)False

Exam 10: Credit Risk I: Individual Loan Risk

In the context of the KMV Credit Monitor Model, the market value of a risky loan made by a lender to a borrower can be expressed as: A)F(r) = Be^-^i/r[(1/d)N(h₁) + N(h₂)] B)F(r) = Be^-^ir[(1/d)N(h₁) + N(h₂)] C)F(r) = Be^-^ir[(1/d)- N(h₁) + N(h₂)] D)F(r) = Be^-^ir[(1/d)N(h₁) *N(h₂)]

Consider the following formula for calculating the contractually promised gross return on a loan k, per dollar lent: (1 + k) = 1 + [f + (BR + m) ]/ {1 - [b(1 - R) ]}.Which of the following statements is true?

Loan to value ratio is the:

A loan provided by a group of FIs as opposed to a single lender is called:

In its simplest form the rate on a loan is set as the base lending rate plus a credit risk premium.

Exam 10: Credit Risk I: Individual Loan Risk

In the context of the KMV Credit Monitor Model, the market value of a risky loan made by a lender to a borrower can be expressed as: A)F(r) = Be-i/r[(1/d)N(h1) + N(h2)] B)F(r) = Be-ir[(1/d)N(h1) + N(h2)] C)F(r) = Be-ir[(1/d)- N(h1) + N(h2)] D)F(r) = Be-ir[(1/d)N(h1) *N(h2)]

Consider the following formula for calculating the contractually promised gross return on a loan k, per dollar lent: (1 + k) = 1 + [f + (BR + m) ]/ {1 - [b(1 - R) ]}.Which of the following statements is true?

Loan to value ratio is the:

A loan provided by a group of FIs as opposed to a single lender is called:

In its simplest form the rate on a loan is set as the base lending rate plus a credit risk premium.

In the context of the KMV Credit Monitor Model, the market value of a risky loan made by a lender to a borrower can be expressed as: A)F(r) = Be^-^i/r[(1/d)N(h₁) + N(h₂)] B)F(r) = Be^-^ir[(1/d)N(h₁) + N(h₂)] C)F(r) = Be^-^ir[(1/d)- N(h₁) + N(h₂)] D)F(r) = Be^-^ir[(1/d)N(h₁) *N(h₂)]