ROE Calculation and Limitations Quiz

What are the five C's of credit used by lenders to assess a borrower's creditworthiness?

Which element of the five C's of credit refers to the borrower's credit history?

What percentage is recommended by the Consumer Financial Protection Bureau as the maximum DTI ratio for homeowners?

What is one way for lenders to assess borrowers' capital according to the text?

How does a larger down payment affect loan terms according to the text?

What is the primary purpose of credit scores and credit reports for lenders?

How does a higher credit score impact a lender's risk assessment?

What financial ratio is used to assess a borrower's capacity to take on additional debt?

What provides lenders with additional security in case a borrower faces unexpected financial challenges?

Which of the following is NOT a factor considered by lenders when assessing creditworthiness?

What factors are taken into account to verify the borrower's capacity to comply with loan obligations?

Which characteristic of each borrower depends on their creditworthiness?

What is a key factor in estimating expected loss in credit risk analysis?

Which aspect affects the exposure at default according to the text?

What type of risk does settlement risk not only have a credit component but also affected by?

What type of risk is associated with the counterparty's failure to pay or deliver after delivery or payment by us?

What is the main determinant of issuer risk?

Which risk appears in the purchase and sale of securities, and disappears when Delivery versus Payment (DVP) systems are adopted?

What is analogous to delivery risk?

Which type of risk is associated with an adverse change in the value of a security due to a change in the market perception of the issuer’s credit-worthiness?

What is the formula for Return on Equity (ROE) based on the text provided?

Why is the degree of openness of ROE small in some countries according to the text?

Which indicators are included in the Risk Appetite Framework (RAF) based on the text?

What is an example of an indicator used to detect changes in the trend of credit portfolio profile based on the text?

Why is qualitative analysis important when assessing credit portfolios according to the text?

What is the primary reference for assessing the financial health of an organization according to the text?

Which indicator is considered the most important and difficult element to measure when it comes to asset quality?

What is used as a quantitative measure of management in terms of profitability?

Which ratio is calculated by dividing total debts by equity to assess solvency?

What type of analysis is conducted to evaluate the balance sheet management in terms of liquidity?

What does providing collateral help to do when securing a loan or credit card?

For what type of credit does the car usually act as collateral?

What is the primary purpose of a cash deposit when opening a secured credit card account?

Why are secured loans and secured credit cards considered less risky for lenders?

What do Counterparty Conditions include in determining someone's qualification for credit?

What is Counterparty risk associated with in terms of credit assessment?

'How you plan to use the money' is considered a factor that affects what in lending decisions?

'Conditions 1.3.2.2 Counterparty Conditions' provide additional information on what aspect related to lending?

'Counterparty risk' is also known by what other term related to financial instruments?

In what cases are lenders more willing to lend money according to the text?

What is the primary risk associated with changes in interest rates affecting an institution's net interest margin?

Which of the following is considered a structural risk in the balance sheet of a financial institution?

In the context of banking business, which is NOT one of the three fundamental pillars on which the banking business is based?

Which financial risk factor is faced by a financial institution due to an adverse change in the value of a security based on market perception of the issuer's credit-worthiness?

Which type of risk is directly related to the activity in various currencies and is faced by a financial institution?

What is the primary purpose of the banking business?

What is concentration risk in credit management related to?

What does market risk entail in financial markets?

Why is the establishment of limits important in risk management?

What metrics are usually used for the quantification of credit risk?

What is the main purpose of risk measurement in banking as mentioned in the text?

How does the level of risk assumed in financial markets affect the capital required for such activities?

In financial markets, what are the three main types of risks mentioned in the text?

What does the term 'risk appetite' refer to in financial institutions according to the text?

Which statement accurately reflects the relationship between risk management and financial market activities?

What should be established to set clear quantitative expectations of losses or negative results in risk management?

What are the main factors linked to credit risk according to the text?

What is used as a potential exposure analysis metric in the context of counterparty risk?

What type of analysis is conducted to evaluate liquidity risk in balance sheet management?

What is the primary determinant of issuer risk in credit risk assessments?

What relevant factors should be considered to verify a borrower's capacity to comply with loan obligations?

Which element is a characteristic of each borrower and is essential for determining their creditworthiness?

What factors contribute to estimating the expected loss in credit risk analysis?

Settlement risk in addition to having a credit component is also influenced by which other risks?

In order to carry out credit risk analysis, what elements should be put in place to estimate the probability of default for each borrower?

What is the primary objective of Asset-Liabilities Management (ALM) in financial institutions?

Which of the following is NOT a fundamental method used to address the measurement of risk factors in the financial field?

How does Balance Sheet (structural) risk affect financial institutions?

What aspect of risk does Asset-Liabilities Management (ALM) primarily focus on managing?

What is one of the objectives pursued by Asset-Liabilities Management (ALM) in financial institutions?

What type of risk is associated with the counterparty's failure to pay or deliver after delivery or payment by us?

Which type of risk appears in the purchase and sale of securities and disappears when Delivery versus Payment (DVP) systems are adopted?

What is analogous to liquidation risk in credit risk analysis?

Which type of credit risk is associated with an adverse change in the value of a security due to a change in market perception of the issuer's credit-worthiness?

What type of risk is incurred when one party fails to deliver/pay after the other has satisfied its obligations?

Which element of credit risk analysis is analogous to liquidation risk?

In credit analysis, which type of risk is associated with an adverse market perception of an issuer's credit-worthiness?

'Issuer Risk' in credit assessment is primarily determined by what factor?

'Settlement Risk' in credit analysis occurs when the counterparty defaults after fulfilling which obligations in a transaction?

'Market Risk' includes exposure to external factors like economy, interest rates, and industry trends, while 'Credit Risk' focuses on what aspect in lending decisions?