If you are a lender, which of the following type of loan is the most beneficial...

If you are a lender, which of the following type of loan is the most beneficial for you? In other words, which of the following type of loan makes you receive the highest amount of interest payments?

		Discount Loan
		Interest- Only Loan
		Amortized Loan
		None

Solutions

Expert Solution

The correct answer is the interest only loan. Under this one, the entire principal is outstanding throughout the term and the interest acts on the entire outstanding. In the amortized loan, the principal gets amortized and hence the interest keeps reducing in every payment.

Between discount loan and interest only loan, usually, the interest ratye is lower in case of discount loan. Interest only loan has higher risk for the lender and hence carries higher interest rate. Because of this the total interest payment to th elender is highest in case of interest only loan.

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Lender Scenario: You are the loan officer for a commercial lender. You have just received a...

Lender Scenario: You are the loan officer for a commercial lender. You have just received a request from the company you are researching to provide loan funds that will allow the company to buy back 3% of its outstanding common stock. The company has indicated to you that it feels their stock is undervalued at this time. What is your response to their request? What will this do to the company’s various debt and equity ratios? Given the competition, should...

Which two of these should you do if your lender rejects your loan application?

Which two of these should you do if your lender rejects your loan application? Ask your home inspector why Ask your lender why File a dispute with the Fair Credit Agency Shop for a different lender or type of mortgage

The lender offers the following terms on the commercial loan of $1,500,000: the loan amortization period...

The lender offers the following terms on the commercial loan of $1,500,000: the loan amortization period is 30 years, interest rate is 7.5%, the payments are to be made monthly and the loan matures in 5 years. Prepare an annual debt service table, with beginning balance principal, interest, ending balance and total debt service rows for 5 years. Which line item is tax deductible? If the loan origination fees are 1.5% and due upon closing, what is the dollar value...

Which of the following terms are found in mortgage loan contracts to protect the lender from financial loss?

Which of the following terms are found in mortgage loan contracts to protect the lender from financial loss?A.Down paymentB.CollateralC.Private mortgage insuranceD.All of the above

Which of the five "C's" are not considered when a lender is granting an unsecured loan?

Which of the following describes the most common bank loan? A. The bank loan is compounded...

Which of the following describes the most common bank loan? A. The bank loan is compounded monthly and quoted to the lender using the monthly periodic rate. B. The bank loan is compounded annually and quoted to the lender using the monthly periodic rate. C. The bank loan is compounded monthly and quoted to the lender using the effective annual rate. D. The bank loan is compounded annually and quoted to the lender using the effective annual rate. E. The...

Can you make the case for legalized “loan sharking”? How can usury (the charging of high interest rates) be beneficial no only to the lender but also to the potential borrower?

Can you make the case for legalized “loan sharking”? How can usury (the charging of high interest rates) be beneficial no only to the lender but also to the potential borrower?Use indifference curve analysis to support your argument.

26) In which of the following situations would you prefer to be the lender?

SCENARIO 4. Notation: C = currency; D = demand deposits; T = time deposits; & S = saving deposits. Suppose M1 = C + D; M2 = C + D + T; M3 = C + D + T + S. Suppose also that C = .05D; T = .4D; & S = .3D. The Fed imposes the following reserve requirements: rd = .2; rt = .3; rs = .15. Banks keep the following excess reserve ratios: ed = .05;...

Which of the Gestalt therapy experiments and interventions do you think are most beneficial to clients?...

Which of the Gestalt therapy experiments and interventions do you think are most beneficial to clients? Why?

Questions: Which of the following is the type of analysis you would most likely use to...

Questions: Which of the following is the type of analysis you would most likely use to assess the impact of arbitrary changes in the discount rate? A.Sensitivity analysis B.Scenario analysis C.Both D.Neither Which of the following is the type of analysis you would most likely use to assess the impact of an economic recession? A.Sensitivity analysis B.Scenario analysis C.Both D.Neither Because most of a company's value comes from the terminal period, we do not have to worry too much about...

Subjects