Question: Answer the following questions, using your own words. 1. What is the importance of loan application analysis? Banks need past or future information of loan

Answer the following questions, using your own words. 1. What is

Answer the following questions, using your own words. 1. What is the importance of loan application analysis? Banks need past or future information of loan applicants to inform the analysis and why? Should a credit officer decline a loan request from businesses with low credit rating and why? (35 marks) a 2. What is allowance for loan losses in a financial institution? What are the purpose of allowance for loan losses? If the provision for loan losses is at the discretion of banks, do they prefer high or low provision for loan losses and why? (30 marks) 3. What is interest-rate sensitivity weight? Interpret the meaning of a weight greater than 1 and a weight less than 1. Can the weighted interest-sensitive gap address all flaws of the interest-sensitive gap approach and why? (35 marks)

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