Lenders generally try to avoid having a lot of "subprime loans" in their portfolio, since these types of loans are more likely to end in the borrower not being able to pay back the money. To balance this risk, lenders will ask for a higher return when they think the loan is more risky. This is called "high risk yield".
These are questions that the above text answers:
1. What is the term used to describe loans that are more likely to result in the borrower being unable to repay the money?
3. What is the term used to describe the higher return lenders ask for when they perceive a loan to be more risky?
4. Why do lenders try to avoid having a lot of subprime loans in their portfolio?
6. What is the potential consequence of a borrower being unable to pay back a subprime loan?
7. How do lenders determine if a loan is more risky?
8. What is the term used to describe loans with a higher risk of default?
9. What is the potential risk for lenders when they have a lot of subprime loans in their portfolio?
10. How do lenders mitigate the risk associated with subprime loans?