Which statement best summarizes underwriting?

The statement that underwriting is a method used to determine the feasibility of granting credit accurately captures the essence of the underwriting process. Underwriting involves evaluating the risk associated with providing a loan or credit to an individual or business. This evaluation includes analyzing credit history, financial stability, repayment capacity, and other relevant factors to assess whether it is prudent to extend credit.

In the context of banking, underwriting helps ensure that financial institutions make informed decisions that align with their risk management policies. By thoroughly assessing these elements, underwriting protects both the lender and the borrower from potential financial problems that may arise due to unmanageable debt levels.

Other statements, while related to financial practices, do not encompass the full scope of underwriting. For instance, setting interest rates for savings accounts does not involve evaluating creditworthiness but rather determines how much banks pay to depositors. Similarly, underwriting is not limited to merger and acquisition transactions; it applies broadly to various lending scenarios. Lastly, while assessing asset values is an important aspect of underwriting, it is just one component of a more comprehensive evaluation process focused on credit approval.