[2008] Topic 39: Credit Risk: Individual Loan Risk 相关习题 following, required, balance, return

aianjie

 

AIM 1: Compute, given the contractual rate and noninterest charges, the contractually promised gross return on a loan.

1、Given the following information:

Base lending rate = 6.0%

Risk premium = 1.2%

Origination fee = 0.25%

Compensating balance required = 10.0%

Reserve requirement = 12%

The contractually promised rate of return on a loan is closest to:

A) 7.49%.

B) 8.66%.

C) 9.05%.

D) 8.17%.

aianjie

 

The correct answer is

The contractually promised return would be 8.17 percent, computed as follows:

 

 

 

[attach]13895[/attach]

aianjie

 

2、Compensating balances represent the:

A) amount of commission that must be paid the underwriting banker.

B) proportion of a loan that must be kept on deposit at the financial institution that made the loan. 

C) ratio of interest to principal that measures risk in the asset-backed security industry.

D) amount of overcollateralization necessary to fund a special purpose entity (SPE).

aianjie

 

The correct answer is B              

Compensating balances represent the proportion of a loan that borrowers cannot actively use for expenditures—it must be kept on deposit at the financial institution that made the loan.

aianjie

 

3、Given the following information, compute the contractually promised rate of return on a loan. 

Base lending rate = 8.0% 

Risk premium = 2.0% 

Origination fee = 0.25% 

Compensating balance required = 12.50% 

Reserve requirement = 8% 

The contractually promised rate of return is closest to:

A) 17.5%.

B) 12.9%.

C) 13.7%.

D) 11.6%.

aianjie

 

The correct answer is D

 

 

[attach]13896[/attach]

aianjie

 

4、If the Federal Reserve wants to stimulate the economy by making loans more affordable, it could:

A) lower the prime rate.

B) sell securities in the open market.

C) reduce the risk premium.

D) lower the reserve requirement.

aianjie

 

The correct answer is D

The Federal Reserve stimulates the economy by making more money available for loans as a result of lowering the reserve requirement. Although the Fed can influence the prime rate, it does not directly set it. The risk premium is independently determined by market participants.

aianjie

 

5、If the Federal Reserve decreases the reserve requirement for a bank, the contractually promised rate of return on the loan would be:

A) the same.

B) lower.

C) higher or lower, depending on the level of short-term interest rates.

D) higher.

aianjie

 

The correct answer is D

Decreasing the reserve requirement (r in the equation below) would mean that the bank had to keep fewer funds in reserve for a given loan, thus increasing the promised return (k).

 

 

 

[attach]13897[/attach]