1. What is meant by the phrase "although it is not necessary to understand finance in order to understand these axioms, it is necessary to understand these axioms in order to understand finance"
2. Consider a fifteen-year mortgage loan secured by residential real estate, with an EAD of $150,000 and an estimated LGD of 15 %. Supposing the customer’s PD is 3%, compute the capital requirement under the Basel II IRB approach, the standardized approach of Basel II, and under Basel I? Briefly discuss the results.
3. What is the APR for a $560 loan when the loan is paid off in 12 equal monthly payments at the stated annual interest rate of 18.0 percent? (Round your answer to 2 decimal places.)