aianjie

 

 

The correct answer is D

Under the option view of the firm, the strike price is set at the level of outstanding debt. As long as the value of the firm exceeds the outstanding debt (strike price), the firm will repay its obligation.

 

aianjie

 

4、Which of the following statements about loan returns is (are) TRUE?

Unexpected loss on the loan can result from default.

Unexpected loss on the loan can result from credit migration.

Loan returns increase as recovery rates decrease.

A) I and II only.

B) I only.

C) II and III only.

D) I, II, and III.

aianjie

 

2、Which of the following is TRUE concerning expected loss and unexpected loss from a bank loan portfolio?

A) Expected loss > unexpected loss.

B) Indeterminate.

C) Expected loss < unexpected loss.

D) Expected loss = unexpected loss.

aianjie

 

The correct answer is C

Unexpected loss is defined as the variation in potential loss around the expected or average loss level.