Reference no: EM133492948

Case: Zhang recently graduated from university and wants to borrow $50 000 to start a business, which she believes will produce a cash flow of at least $10 000 per year. As a student, Zhang was active in clubs, held many leadership positions, and did a lot of community service. She currently has no other debts. She owns a car worth about $10 000, has $6 000 in a savings account and $12 000 invested in Qantas shares. Although the economy is currently in a recession, economic forecasters expect the recession to end soon.

If you were a bank loan officer, how would you evaluate Zhang's loan request within the context of the "5 C's of Credit"? First, briefly describe each characteristic and indicate whether it has favourable or unfavourable implications for Zhang's loan request. Then, where appropriate, indicate other information you might request to help with your analysis.

Question 1: Explain why it might be preferable for Zhang to invest in a portfolio of securities rather than in a single security.

Question 2: In relation to real estate, explain the difference between direct and indirect investment.