Why have the use of standby credit letters grown in recent years? Answer The growth of bank loans sought by companies in recent years The decreased demand for risk reduction devices The high cost of standby credit letters in recent years The rapid growth of direct financing by companies All of the above

Why have the use of standby credit letters grown in recent years?
Answer

		The growth of bank loans sought by companies in recent years
		The decreased demand for risk reduction devices
		The high cost of standby credit letters in recent years
		The rapid growth of direct financing by companies
		All of the above

Answer
The rapid growth of direct financing by companies

A bank has placed 5000 consumer loans in a package to be securitized. These loans have an annual yield of 15.25 percent. This bank estimates that the securities on these loans are priced to yield 10.95 percent. The bank expects 1.45 percent of the loans will default. Underwriting and advisory services will cost .25 percent and a credit guarantee if more loans default than expected will cost .35 percent. What is the residual income from this loan securitization? Answer 3.70 percent 4.30 percent 2.25 percent 5.15 percent None of the above

A bank has placed 5000 consumer loans in a package to be securitized. These loans have an annual yield of 15.25 percent. This bank estimates that the securities on these loans are priced to yield 10.95 percent. The bank expects 1.45 percent of the loans will default. Underwriting and advisory services will cost .25 percent and a credit guarantee if more loans default than expected will cost .35 percent. What is the residual income from this loan securitization?
Answer

		3.70 percent
		4.30 percent
		2.25 percent
		5.15 percent
		None of the above

Answer

2.25 percent