In the Moody's Analytics Portfolio Model,the Expected Return on a Loan

question 32

Multiple Choice

In the Moody's Analytics portfolio model,the expected return on a loan is the

• A)annual all-in-spread minus the expected loss on the loan.
• B)annual all-in-spread minus expected probability of the borrower defaulting over the next year.
• C)annual all-in-spread minus the loss given default.
• D)the interest and fees paid by the borrower minus the interest paid by the FI to fund the loan.

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Definitions:

Error

A mistake or discrepancy caused by a failure in judgment, incorrect reasoning, or an oversight.

Judgment

The capacity to make well-considered choices or come to reasonable conclusions.

Optimistic Bias Heuristic

A cognitive shortcut that leads individuals to believe that they are less likely to experience negative events compared to others.

Error

A mistake in reasoning, action, or calculation that may lead to incorrect conclusions or outcomes.