Which of the Statements Below Is FALSE

question 20

Multiple Choice

Which of the statements below is FALSE?

• A)No part of the default premium has to do with the frequency of default by the borrower.
• B)For the home loan,the collateral (the house)is an asset that will increase in value over time (in general)compared to a car loan where the collateral (the car)decreases in value over time.
• C)With a house,the potential loss due to default is less than a car because the growing value of the asset should be sufficient to cover the outstanding balance (principal)of the loan.
• D)A personal credit card essentially has no collateral so the potential loss is even higher if the customer defaults on his or her credit card payments.

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Definitions:

Net Income

The conclusive financial profit of a company after subtracting expenses and tax payments from its revenue stream.

Dividends

Funds dispensed by a business to its shareholders, allocating a fraction of the company's financial gains to them.

Operating Cash Flow

The cash generated from the normal operations of a company, reflecting the amount of cash earned from the production and selling of goods and services.

Depreciation Expense

The allocated portion of the cost of a fixed asset to expense over the asset's useful life to represent its use and wear and tear over time.