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:

Service Cost

The portion of the pension expense that is attributed to the current year's service, representing the present value of benefits earned by employees during the year.

Pension Trustee

An individual or organization that holds and manages the assets of a pension fund on behalf of its beneficiaries.

Pension Plan

A retirement plan offered by an employer, providing financial benefits to employees upon retirement.

Journal Entries

Recorded transactions in the accounting records of a business, showing the financial effects of business transactions.