Match loan defenses: 1. Risk: p. Margins 2. Arrear: q. Bad debt 3. Buffer: r. Cushion
- 1-p, 2-q, 3-r
- 1-p, 2-r, 3-q
- 1-q, 2-p, 3-r
- 1-r, 2-p, 3-q
Show answer and solution
Correct answer: A. 1-p, 2-q, 3-r
Risk-based pricing charges wider spreads on risky borrowers, defaults represent delinquent loans, and capital buffers cushion unforeseen losses.