Borrower Reputation Is Important in Assessing Credit Quality Because

question 96

Multiple Choice

Borrower reputation is important in assessing credit quality because

• A)good past payment performance perfectly predicts future behavior.
• B)preservation of a good customer/FI relationship acts as an additional incentive to encourage loan repayment.
• C)FIs only lend to customers they know.
• D)customers with poor credit histories always default on their loans.
• E)a reputation for honesty is important in credit appraisal.

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Definitions:

Par Value

The nominal or face value of a stock or bond as stated by the issuing company, which may differ from its market value.

Amortized

The process of gradually writing off the initial cost of an asset over a period, typically the asset's useful life.

Retirement

The process of leaving one's job or career and ceasing to work, typically due to age.

Premium on Bonds Payable

The amount by which the selling price of a bond exceeds its face value, representing an additional cost to the issuer.