Raising Capital: Credit Tech, Coin Offerings, and Crowdfunding Quiz Answers

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Raising Capital: Credit Tech, Coin Offerings, and Crowdfunding Week 01 Quiz Answers

Quiz : Case Discussion Participation

Q1. I certify that I participated in the case discussion and that my own original thinking is shown in my discussion post(s).

• Yes, I participated in the case discussion for this lesson.
• No, I did not participate in the case discussion for this lesson.

End of Module Quiz

Q1. A borrower with an income of $5,000 per month is seeking a loan.  She currently has a total of $1,000 in total monthly loan payments.  She is seeking a loan that would require an additional $1,000 in monthly payments.  If the lender follows a 28%/36% underwriting rule, would she qualify for the loan?

• Yes, she meets both the 28% and the 36% rule
• No, because she meets neither the 28% rule nor the 36% rule
• No, because she meets the 28% rule but not the 36% rule
• No, because she meets the 36% rule but not the 28% rule

Q2. In the previous question, what is the maximum loan payment of a loan that the lender would be willing to extend?

• $800
• $1,000
• $400
• $0

Q3. Which of the following would NOT directly affect your FICO score?

• Whether or not your bills are paid on time
• You have had one credit card for one year, and you have had no other debt
• Your annual income
• You carry a balance on your credit cards close to your credit limit every month

Q4. What is your credit score designed to tell lenders?

• The probability that your loan will go 30 days past due in the next two years
• The probability that the loan will be charged off in the next two years
• The probability that your loan will go 90 days past due in the next two years
• The probability that you will file for bankruptcy in the next two years

Q5. Which of the following does NOT contribute directly to expected loss given default?

• The interest rate on the loan
• The probability that you will default
• The amount of the loan that the lender can recover if you default
• The amount of the loan outstanding when you default

Q6. A borrower requests a loan for $50,000 for one year.  The lender assesses a 5% probability of default and believes that none of the loan will be recoverable if the borrower defaults.  If the risk-free rate is 2%, what interest rate will the lender charge if she demands a 5% risk premium on this type of loan?

• 15%
• 12%
• 10%
• 5%

Q7. In the previous question, which of the following could the borrower do in order to reduce his interest rate?

• Letting the lender have loan payments automatically taken out of his paycheck every two weeks
• Agree to make monthly payments on the amount outstanding
• Borrow against a car that he owns worth $25,000
• All of the above

Q8. Which of the following reasons drive the need to use logistic regression in predicting bad lending outcomes?

• There is insufficient data to conduct a linear regression analysis
• Logistic regression analysis always gives better forecasts than linear regression analysis
• A linear regression analysis cannot be used to make predictions, but a logistic analysis can
• The dependent variable has only two possible values

Q9. A data analyst performs a logistic regression of whether or not a loan goes into default (y=0 if the loan does not go into default, y=1 if the loan defaults) on three variables:  the borrower’s debt to income ratio, a variable that takes on the value x=1 if the borrower owns their home and x=0 if the borrower rents their home, and the length of the borrower’s employment.  The regression outputs the following coefficients, with t-statistics in parentheses:

Intercept:  -2.32 (-107.93)

Debt-to-Income:  0.16 (1.43)

Ownership:  -0.21 (-9.75)

Employment Length:  -0.03 (-10.49)

Which of these variables are statistically significantly important for determining the probability that a borrower will default?

• All three variables
• Debt-to-Income and Ownership
• Debt-to-Income and Employment Length
• Ownership and Employment Length

Q10. In the previous question, by what percentage does the probability of default increase or decrease if the borrower owns their own home, the borrower’s debt to income is 0, and the borrower has 0 years employment history?

• It increases by about 0.21%
• It increases by about 1.58%
• It falls by about 1.58%
• It falls by about 0.21%

Raising Capital: Credit Tech, Coin Offerings, and Crowdfunding Week 02 Quiz Answers

Quiz : Case Discussion Participation

Q1. I certify that I participated in the case discussion and that my own original thinking is shown in my discussion post(s).

• Yes, I participated in the case discussion for this lesson.
• No, I did not participate in the case discussion for this lesson.

Quiz : Case Discussion Participation

Q1. I certify that I participated in the case discussion and that my own original thinking is shown in my discussion post(s).

• Yes, I participated in the case discussion for this lesson.
• No, I did not participate in the case discussion for this lesson.

Raising Capital: Credit Tech, Coin Offerings, and Crowdfunding Week 03 Quiz Answers

Quiz : Case Discussion Participation

Q1. I certify that I participated in the case discussion and that my own original thinking is shown in my discussion post(s).

• Yes, I participated in the case discussion for this lesson.
• No, I did not participate in the case discussion for this lesson.

End of Module Quiz

Q1. Which one of the following words best summarizes the nature of the product offering that we discussed during the BaaS module?

• Biometrics
• API
• Cashless
• Automation

Q2. What is the nature of BaaS?

• Competing with new fintech entrants for new & unbanked customers
• Outsourcing nonessential banking-related services to third-party providers
• Developing a middleware layer that connects fintech front-ends with bank back-ends
• Providing add-on services such as wealth management and trading to existing banking customers

Q3. What right does a utility token issued in an ICO confer?

• A claim to the residual cash flow from the proposed product or service
• Voting right on corporate governance matters
• Access right to the proposed product or service
• A first-in-line claim on assets in case of bankruptcy

Q4. On an online lending platform such as LendingClub, which variable is NOT a factor affecting the interest rate assigned to a particular loan?

• The estimated default risk of the loan
• The term of the loan e.g. when does it mature
• The prevailing interest rate environment
• The expected costs of marketing and compliance

Q5. Which of the following might constitute a key competitive advantage of credit-tech innovators?

• The ability to sidestep privacy issues common in bank lending
• The ability to quickly raise funds from both small and large investors
• The ability to gather more aspects of user data such as social media information and online purchases
• A more accurate forecast of the prevailing interest rate environment

Q6. On many online lending platforms, you’ll often see that the loans offered are cut into smaller pieces of “notes” that one can buy in small increments. 

Why are they doing this?

• To reduce investor exposure to idiosyncratic default risks
• To expand its reach to more borrowers
• To allow for easier regulatory compliance
• To reduce the average transaction fees charged per loan

Q7. On many online lending platforms, you’ll often see that the loans offered are cut into smaller pieces of “notes” that one can buy in small increments. 

What is this practice NOT able to achieve?

• Reducing investor exposure to systematic default risks
• Increasing the platform’s reach to smaller investors
• Allowing investors to build a more diversified portfolio

Q8. Which of the following statements about crowdfunding are true? Please select all that apply.

• Both individuals and institutions can raise funds via crowdfunding
• Both individuals and institutions can invest in a crowdfunding deal
• While only accredited investors can participate in equity-based crowdfunding, all investors can participate in reward-based crowdfunding
• Reward-based crowdfunding campaigns are more strictly regulated than equity-based offerings

Q9. Who bears the default risk in a platform loan deal (such as those issued by LendingClub)?

• Purchasers of these loans
• The platform (e.g. LendingClub)
• The bank that services the loan accounts
• The bank that does the underwriting

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