Skip to content

NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Debt Management and Loans

A borrower has a home loan on a floating rate linked to an external benchmark. When the benchmark rate falls and the lender passes on the change, which component of the borrower's loan is most directly affected?

The interest rate charged is affected, and through it the EMI or the tenure. A floating rate loan reprices with its benchmark, while the sanctioned principal and the sanction-time loan-to-value ratio stay as originally fixed.

  1. AThe principal amount originally sanctioned
  2. BThe interest rate charged, and hence the EMI or tenureCorrect
  3. CThe loan-to-value ratio fixed at sanction
  4. DThe property's registered market value

Explanation

A floating rate loan reprices when its benchmark changes. The change in rate alters the interest charged, which shows up as a different EMI or a changed tenure. The sanctioned principal and the LTV set at sanction do not change because of a benchmark move.

Did you get it right without looking?

One question tells you little. A timed set on Debt Management and Loans shows your real accuracy, how long you take and where you lose marks.

Practise Debt Management and LoansFree diagnostic mock

More Debt Management and Loans questions