Consumer Credit Can Take the Form of an Installment Loan

question 113

Multiple Choice

Consumer credit can take the form of an installment loan that is repaid in ____ payments over a ____ period of time.

• A)variable; variable
• B)equal; set
• C)increasing; set
• D)decreasing; variable

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Definitions:

Capital Allocation Line

A line on a graph that shows the rates of return of portfolios that optimally combine risk and return for an investor.

Risk-averse Investors

Individuals who prefer lower returns with known risks rather than higher returns with unknown risks.

Optimal Risky Portfolio

An investor’s best combination of risky assets; the combination that maximizes the Sharpe ratio.

Expected Utility

A theory in economics that calculates the utility expected from an investment or action, considering all possible outcomes weighted by their likelihood.