Anthony Newton wants to buy a new sail boat.He is planning on making a $10,000 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)None of these.

Question

Quizplus · Accepted Answer

By making a large cash down payment, Anthony is taking on a higher stake in the asset he is purchasing. This means he has more to lose if he defaults on the loan, and therefore his lender's risk is reduced.

Anthony Newton Wants to Buy a New Sail Boat