Which of the Following Is FALSE Regarding Negative Amortization

question 34

Multiple Choice

Which of the following is FALSE regarding negative amortization?

• A)It can result in a decrease to the borrower's equity in the property
• B)It usually increases default risk
• C)It usually has a lower interest rate than a conventional loan
• D)It usually results in a lower DCR

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Definitions:

Marginal Returns

Marginal Returns refer to the additional output or benefit received from increasing one unit of a particular input while keeping other inputs constant.

Marginal Cost

The incremental cost associated with the production of an extra unit of a product or service.

Marginal Cost Curve

A curve that displays the additional cost associated with producing one more unit of output, typically showing how marginal cost changes with changes in production volume.

Total Cost Curve

A graph that shows the total cost incurred by a firm in the production of goods or services at different levels of output.