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Question
Loan sales do not completely protect the lending FI from credit risk exposure because
A. defaults may reduce the ability of the lending bank to sell loans in the future.
B. a loan sale contains an implicit quality guarantee by the lending FI.
C. loans are always sold with recourse.
D. regulators require the lending FI to make restitution for defaulted loans.
E. loan sales force the FI to mark its remaining loans to market prices.
Answer
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