Which of the Following Statements Does Not Reflect a Borrower-Specific

question 72

Multiple Choice

Which of the following statements does not reflect a borrower-specific factor often used in qualitative default risk models?

• A)Reputation is an implicit contract regarding borrowing and repayment that extends beyond the formal explicit legal contract.
• B)A borrower's leverage ratio is positively related to the probability of default over all levels of debt.
• C)Firms with high earnings variance are less attractive credit risks than those firms that have a history of stable earnings.
• D)Loans can be collateralized or uncollateralized.
• E)Reputation is a key reason why initial public offering of debt securities by small firms have a higher interest rate than do debt issues of more seasoned borrowers.

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Definitions:

Anterograde Amnesia

A condition where a person is unable to form new memories following the onset of the amnesia, though long-term memories from before the event remain intact.

Retrograde Amnesia

A loss of memory for events or information learned before an injury or the onset of a disease.

Electroconvulsive Therapy

An approach to treating psychological disorders by triggering seizures with electrical impulses to aid in symptom relief.

Consolidation

Refers to the process of stabilizing and integrating new information into long-term memory.