Any Model That Seeks to Estimate an Efficient Frontier for Loans

question 37

Multiple Choice

Any model that seeks to estimate an efficient frontier for loans, and thus the optimal proportions in which to hold loans made to different borrowers, needs to determine and measure the

• A)expected return on each loan to a borrower.
• B)risk of each loan made to a borrower.
• C)correlation of default risks between loans made to borrowers.
• D)expected return of the entire loan portfolio
• E)All of these.

---

Definitions:

Opportunity Cost

The value of the best alternative forgone when a decision is made over others.

Hybrid Cars

Vehicles powered by a combination of an internal combustion engine and one or more electric motors, using less fuel and emitting less CO2 than conventional vehicles.

Motorcycles

Two-wheeled vehicles that are powered by an engine, often used for both transportation and recreation.

OLED Televisions

TVs that use Organic Light-Emitting Diode technology to produce images, known for thick contrast, deep blacks, and energy efficiency.