The Likelihood That a Customer Will Fail to Repay Credit

question 32

Multiple Choice

The likelihood that a customer will fail to repay credit extended to it is referred to as ____.

• A) default risk
• B) maturity risk
• C) bad-debt loss ratio
• D) opportunity cost

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Definitions:

Creditworthiness

The assessment of a borrower's ability to repay loans based on their financial history, including factors like income, debt levels, and credit score.

Asset Portfolio

A diversified collection of investments held by an individual or institution, which can include stocks, bonds, real estate, and other financial assets.

Financial Crisis

A situation where the value of financial institutions or assets drops rapidly, leading to widespread economic disruption and potential government intervention.

Checkable Deposits

Bank account balances that can be withdrawn using checks, debit cards, or electronic transfers without restrictions.