Asked by Tasiah Anderson on Jul 29, 2024
Verified
A loan backed by an asset the lender can sell to pay off the loan if the borrower defaults is called _____.
A) amortized
B) collateralized
C) guaranteed
D) riskless
Collateralized
Secured by an asset or property as a guarantee to repay a loan.
Amortized
The process of gradually reducing a debt through regular payments over time, which include both principal and interest components.
Borrower Defaults
Borrower defaults occur when a borrower fails to meet the legal obligations of a loan, such as not making scheduled payments.
- Absorb the foundational elements and lexicon connected to financial markets and securities.
Verified Answer
MN
Mahnoor NadeemAug 02, 2024
Final Answer :
B
Explanation :
A loan that is collateralized means that the lender has a security interest in an asset that the borrower pledges as collateral. If the borrower defaults, the lender can sell the collateral to recover the amount owed on the loan. This reduces the lender's risk and makes the loan less risky, which may result in lower interest rates for the borrower.
Learning Objectives
- Absorb the foundational elements and lexicon connected to financial markets and securities.