12-29 Any Model That Seeks to Estimate an Efficient Frontier

question 48

Multiple Choice

12-29 Any model that seeks to estimate an efficient frontier for loans,and thus the optimal proportions in which to hold loans made to different borrowers,needs to determine and measure the

• A)expected return on each loan to a borrower.
• B)risk of each loan to a borrower.
• C)correlation of default risks between loans made to borrowers.
• D)expected return of the entire loan portfolio
• E)All of the above.

---

Definitions:

Accounts Payable

Money owed by a company to its creditors for goods or services that have been delivered but not yet paid for.

Shortage Costs

Expenses incurred when demand exceeds supply, including lost sales and the cost of expedited orders or production to meet demand.

Restrictive Financing Policy

A financial strategy that involves maintaining lower levels of current assets or using more short-term financing to fund those assets, aiming to reduce costs but increase risk.