Final answer:
The correct answer is (a) Loan term. This term represents the duration over which the loan should be fully repaid, such as the common 30-year mortgage loan for home purchases. The value of a loan can be measured by what it could be sold for in the secondary loan market.
Step-by-step explanation:
The time frame during which a loan should be repaid in full is known as the loan term. For example, a family obtaining a 30-year mortgage for a home is committed to repaying the loan within this agreed-upon period. The loan, in turn, serves as an asset for the lending institution, generating a stream of payments over time.
In the financial market, the present value of such a loan can be assessed by estimating the amount other market participants are willing to pay for it. This evaluation often occurs in the secondary loan market, where financial institutions engage in buying and selling loans that were initially originated in the primary loan market. This market dynamic allows for liquidity and transferability of loans, enabling financial institutions to manage their portfolios and allocate capital more efficiently.