Any Model That Seeks to Estimate an Efficient Frontier for Loans

question 52

Multiple Choice

Any model that seeks to estimate an efficient frontier for loans, and thus the optimal proportions in which to hold loans made to different borrowers, needs to determine and measure the

• A)expected return on each loan to a borrower.
• B)risk of each loan made to a borrower.
• C)correlation of default risks between loans made to borrowers.
• D)expected return of the entire loan portfolio
• E)All of the options.

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Definitions:

Altruistic Behavior

Actions by an individual that benefit others at a cost to itself, often seen in social animals and key in studies of social evolution.

Relatedness

Relatedness refers to the genetic connection or relationship between individuals, typically measured as the proportion of shared genes among relatives.

Evolution

The process through which species change over time through mechanisms like natural selection, mutation, genetic drift, and gene flow.

Aplysia

A genus of sea slugs known for their role in neurobiological studies, particularly in the context of learning and memory.