Which of the Following Statements Does Not Reflect a Borrower-Specific

question 72

Multiple Choice

Which of the following statements does not reflect a borrower-specific factor often used in qualitative default risk models?

• A)Reputation is an implicit contract regarding borrowing and repayment that extends beyond the formal explicit legal contract.
• B)A borrower's leverage ratio is positively related to the probability of default over all levels of debt.
• C)Firms with high earnings variance are less attractive credit risks than those firms that have a history of stable earnings.
• D)Loans can be collateralized or uncollateralized.
• E)Reputation is a key reason why initial public offering of debt securities by small firms have a higher interest rate than do debt issues of more seasoned borrowers.

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Definitions:

Depressant Drugs

Substances that reduce the activity of the central nervous system and can lead to relaxation, reduced anxiety, or sleepiness.

Psychological Dependence

A condition characterized by a perceived need to continue using a substance due to emotional or psychological reliance, despite potential harm.

Medications

substances used in the treatment, diagnosis, or prevention of diseases and for relieving pain or affecting the structure of any part of the body.

Attention Narrowing

The phenomenon where focus is restricted to a limited range of stimuli or tasks, ignoring peripheral information.