From the Perspective of an FI, Which of the Following

question 27

Multiple Choice

From the perspective of an FI, which of the following is an advantage of a floating-rate loan?

• A)Stable interest payments will be received throughout the loan period.
• B)The pre-specified interest rate remains in force over the loan contract period no matter what happens to market interest rates.
• C)The bank can request repayment of a loan at any time in the contract period.
• D)The default risk is completely eliminated.
• E)The interest rate risk is transferred to the borrower.

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Definitions:

Residual Degrees

Residual degrees, more commonly known as degrees of freedom in residuals, indicate the number of independent pieces of information available to estimate variability or error in statistical models.

Degrees of Freedom

The total number of individual elements or magnitudes that can alter within an examination without contravening any conditions.

Output

The final product, result, or amount produced by a process, system, or activity.

Multicollinearity

A statistical phenomenon where two or more independent variables in a regression model are highly correlated, potentially affecting the reliability of the model’s coefficients.