Why Is the Debt Limit Ratio and 28/36 Rule More

question 7

Essay

Why is the debt limit ratio and 28/36 rule more important to conservative lenders like Banks and Credit Unions and not so important for lenders like small Finance companies and Payday lenders?

---

Definitions:

Dollar-Weighted Return

A method of calculating an investment's return that considers the timing and amount of capital inflows and outflows.

Dividend

A portion of a company's earnings distributed to its shareholders, usually in the form of cash or additional stock.

Sharpe Measure

A measure for calculating the performance of an investment compared to a risk-free asset, after adjusting for its risk, often used to understand the risk-adjusted return.

Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates higher volatility than the market.