Bob Borrowed $200,000 from ABC Bank to Purchase His Residential

question 38

Multiple Choice

Bob borrowed $200,000 from ABC Bank to purchase his residential house.A mortgage was used as the financing vehicle.Several years later Bob encountered financial difficulties.He did not pay his mortgage payments for 4 months and the bank foreclosed.At that time,the remaining loan balance was $170,000.Bob had not maintained the property well,and the winning bid at the foreclosure auction sale was only $150,000.Is Bob liable for the $20,000 deficiency that has resulted (using the majority rule) ?

• A)No,because the property was his residence.
• B)No,because there is no guarantor with secondary liability involved in this transaction.
• C)Yes,because the proceeds of sale did not satisfy the remaining loan balance.
• D)Yes,because there is no surety or guarantor involved in this transaction.

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Definitions:

Value At Risk

A statistic that measures and quantifies the level of financial risk within a firm or portfolio over a specific time frame.

Compound Return

The rate of return on an investment over a specified period, taking into account the effect of compounding, where the investment's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time.

Geometric Average

A method of calculating the average rate of return of a set of values by multiplying them together and taking the nth root, where n is the number of values.