A Bank Loan Officer Were Considering a Company's Request for a Loan

question 21

Multiple Choice

a bank loan officer were considering a company's request for a loan, which of the following statements would you consider to be CORRECT?

• A)The lower the company's EBITDA coverage ratio, other things held constant, the lower the interest rate the bank would charge the firm.
• B)Other things held constant, the higher the debt ratio, the lower the interest rate the bank would charge the firm.
• C)Other things held constant, the lower the debt ratio, the lower the interest rate the bank would charge the firm.
• D)The lower the company's TIE ratio, other things held constant, the lower the interest rate the bank would charge the firm.
• E)Other things held constant, the lower the current ratio, the lower the interest rate the bank would charge the firm.

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Definitions:

Index Model

In finance, it is a statistical model used to describe the performance of an asset or portfolio relative to a particular benchmark or market index.

Covariance

A measure of how two securities move together, used to assess the degree to which they co-vary.

Assets GM and GE

Refers to the tangible and intangible items owned by General Motors (GM) and General Electric (GE) that are used in their operations to generate revenue.

Beta

A measure of the volatility, or systematic risk, of a security or portfolio in comparison to the market as a whole.