Credit Risk Is the Risk That

question 1

Multiple Choice

Credit risk is the risk that

• A)an insufficient number of borrowers will apply for loans or credit.
• B)interest rates will rise after a loan has been granted.
• C)interest rates will fall after a loan has been granted.
• D)borrowers might default on their loans.

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Definitions:

Delay-of-Gratification

The capacity to withstand the allure of an instant gratification in favor of a future benefit.

Need to Belong

An inherent human need to form and maintain strong, stable interpersonal relationships.

Familiarity Principle

The psychological phenomenon where people tend to develop a preference for things merely because they are familiar with them.

Delay Gratification

The strength to forego an immediate payoff for the sake of a more substantial reward at a later time.