Why is the degree of collateral as specified in the loan agreement of importance to a lender?

Question:

Why is the degree of collateral as specified in the loan agreement of importance to a lender? If the book value of the collateral is greater than or equal to the amount of the loan, is the credit risk of a lender fully covered? Why, or why not?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Financial Institutions Management A Risk Management Approach

ISBN: 978-0071051590

8th edition

Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders

See More Books

Question Posted: Dec 17, 2015 04:50 AM

See More Questions

Why is the degree of customization an important consideration in process planning?
Mo & Chris's Delicious Burgers, Inc., sells food to Military Cafeterias for $15 a box. The fixed costs of this operation are $80,000, while the variable cost per box is $10. a. What is the break-even...
The Lopez-Portillo Company has $10.6 million in assets, 80 percent financed by debt, and 20 percent financed by common stock . The interest rate on the debt is 9 percent and the par value of the...
Builder Products, Incorporated, uses the weighted-average method in its process costing system. It manufactures a caulking compound that goes through three processing stages prior to completion....
A business student needs cash, so he decides to sell his car. The car is a valuable BMW 850CSi that was only made over the course of a few years in the 1990s. He would like to sell it on his own,...
B. Pedigo and W. Vernon have capital balances on January 1 of 50,000 and 40,000, respectively. The partnership income-sharing agreement provides for (1) annual salaries of 20,000 for Pedigo and...
An appropriate turbulent pipe flow velocity profile is \[ \mathbf{V}=u_{c}\left(\frac{R-r}{R} ight)^{1 / n} \hat{\mathbf{i}} \] where $u_{c}=$ centerline velocity, $r=$ local radius, $R=$ pipe...
J. J. Technology Company, which operates a chain of 30 electronics supply stores, has just completed its fourth year of operations. The direct write-off method of recording bad debt expense has been...
Write a MIPS assembly code with minimum possible assembly instructions for the following C++.. Assume that the variables num1, num2 and num3 are already saved in some MIPS registers. if (x > 0 && y...
On January 1, 2022, Lin plc issued a convertible bond with a par value of 50,000 in the market for 60,000. The bonds are convertible into 6,000 ordinary shares of 1 per share par value. The bond has...
Identify and define the borrower-specific and market-specific factors that enter into the credit decision. What is the impact of each type of factor on the risk premium? The borrower-specific factors...
Why are FIs consistently interested in the expected level of economic activity in the markets in which they operate? Why is monetary policy of the Federal Reserve System important to FIs?
A 36-year-old mother of four is considering tubal ligation to ensure that her family gets no larger. She asks the physician if she will become "menopausal" after the surgery. (a) How would you answer...
Consider a small open economy (e.g. the Netherlands) producing two goods, clothing and food. The clothing industry uses capital (K) and labor (LC) as inputs, while the food industry uses land (La)...
There are a few points that I hope to bring into the light for you concerning psychotherapeutic drugs. In some cases, these drugs are necessary as the individual is suffering severely. In most cases,...
Question it is the bankruptcy question ASKED: how much money is left for unsecured debt. Also, list the debt that is unsecured one by one Peter was the child of German immigrants, and at one time had...
Consider the recurrence that naturally arises in some divide-and-conquer algorithms: T(1)= 1, T(n) = 4T(n/2) + n for n > 1 [a] Explain what the initial condition and the various parts of this...
The December 31, 2018 trial balance of KIM Company showed the following information P 14,000,000 Sales return & allow. Factory overhead Sales Purchases 2,400,000 Freight-in 30.000 Direct labor...
Musqueam Culinary Experiences operates a successful catering business specializing in Indigenous food and beverages. Musqueam Culinary Experiences financial statements for 2023, 2024, and 2025 show...
For Problem estimate the change in y for the given change in x. y = f(x), f'(12) = 30, x increases from 12 to 12.2
Suppose you see evidence that the stock market is efficient. Would that make you more or less likely to invest in stocks for your 401(k) retirement plan when you get your first job?
Professor Siegel argues that investing in stocks for retirement may be less risky than investing in bonds. Would you recommend this approach to an individual in his or her early 60s?
How do venture capital firms, which specialize in identifying and financing promising but high-risk businesses, help the economy grow?
Large-scale industrial production - accompanied by massive technological change, expanding international communication networks, and pro-growth government policies-generated rapid economic...
How can this relate to individuals who have had a TBI and are currently homeless or marginally housed?
1. According to Marxian theory, are crises an economic process inherent to the accumulation dynamics of current capitalism? Justify your answer. 2. According to Marxian theory, what do you consider...

Why is the degree of collateral as specified in the loan agreement of importance to a lender?

Question:

Step by Step Answer:

Collateral provides the lender with some assets that can be used against the amoun...View the full answer

Financial Institutions Management A Risk Management Approach

Students also viewed these Banking questions