bussiness report question

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Question 3: Higher Subprime
Interest Vs. Higher Default Costs?

  • Calculate average interest loss if loan becomes delinquent.

  • Use estimated numbers in case and Mary’s assumptions.

  • No need to use outside data

  • What is expected loss?

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Question 4: Should Mary Sell
Some Subprime Loans?

  • What is the secondary market?

  • How does selling loans on the secondary market affect bank’s risk exposure?

  • Look at the possible gains and losses to the bank after December 2006 – look at possible macroeconomic factors.

  • Make your case on data prior to January 2007.

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