Anthony Newton wants to buy a new sail boat.He is planning on making a $9,000 cash down payment,which is a large portion of the cost of what he is financing.In which way is Anthony reducing his lender's risk?
A)He is sharing the interest rate risk with his lender.
B)He is pledging valuable assets that can be seized if the loan is not repaid.
C)He is taking a higher stake in the asset he is purchasing.
D)He is repaying the loan over a faster period of time.
E)He is increasing his monthly payments.

Question

Quizplus · Accepted Answer

By making a large down payment, Anthony is taking a higher stake in the asset he is purchasing, which reduces the lender's risk because it shows commitment and reduces the loan-to-value ratio.

Anthony Newton Wants to Buy a New Sail Boat