QUESTION 23

PART A:

Which of the following is most likely to be correct?

a.

loans granted to borrowers with very high FICO scores (750-850) are likely to be subprime loans

b.

loans granted to borrowers with very low FICO scores (350 to 550) are likely to be subprime loans

c.

subprime loans have lower interest rates than other loans

d.

subprime loans are the safest loans that a bank issues

e.

subprime loans are a major liability category on the balance sheet for many banks

PART B:

Which of the following combinations of two ratios would be considered to have the highest probability of being viewed favorably by banks in a loan application

a.

90% loan to value ratio and 40% debt to income ratio

b.

60% loan to value ratio and a 20% debt to income ratio

c.

60% loan to value ratio and 40% debt to income ratio

d.

100% default ratio on previous loans and a zero current income to proposed loan payment ratio

e.

90% loan to value ratio and 20% debt to income ratio