Subprime Loans

question 37

Multiple Choice

Subprime loans

• A) involve elevated credit risk.
• B) involve reduced credit risk.
• C) typically have a higher loan-to-value ratio than do prime loans.
• D) typically have a lower loan-to-value ratio than do prime loans.
• E) a and c

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Definitions:

Time To Maturity

The duration until a financial instrument, such as a bond or loan, reaches its due date and the principal must be repaid.

Increases

Describes an upward trend in numerical value or volume.

Bond Ratings

Assessments of the creditworthiness of corporate or governmental bonds, reflecting the issuer's ability to make bond payments, issued by rating agencies.

Creditworthiness

An assessment of a borrower's ability to repay debts in a timely manner, typically considered by lenders before issuing credit.