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

question 31

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.
• E)the interest and fees paid by the borrower minus the expected loss on the loan.

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Definitions:

Standard Deviation

Standard deviation is a measure of the dispersion or variability of a set of data points, indicating how much the individual data points differ from the mean value.

Stand Alone Risk

The risk associated with a particular investment or project considered in isolation from the rest of the portfolio or company's operations.

Covariance

A measure of how two random variables change together, indicating the direction of their linear relationship.

Standard Deviation

A statistical measure of the dispersion or variability of a set of data points, indicating the degree to which individual data points differ from the mean.