Banking Financial Awareness · Commerce Accountancy

Credit, Debt, and Finance

1,435 Questions

This topic covers essential concepts of credit, debt, and finance including bankruptcy, debt recovery, and financial acts. These questions are frequently asked in banking and IBPS exams. Test your knowledge of financial terminology and loan classifications.

Debt recovery actsBankruptcy filing proceduresFinancial classificationsMedium term financeCredit loss management

Credit, Debt, and Finance Questions

Multiple choice

Bad debts arise out of both cash and credit sales.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Explanation: When cash sales are effected, cash comes into the business immediately. There is no case of non-recovery. However, in case of credit sales, the seller gives time to the debtor to pay the money for the goods purchased by the buyer. There are chances of money going bad (non-recovery).

Multiple choice

Which of the following is not considered as National Debt?

  1. National Savings Certificates

  2. Long - term Government Bonds

  3. Insurance Policies

  4. Provident Fund
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Insurance policies are commercial contracts between individuals and insurance companies, not government borrowing instruments. National Savings Certificates, long-term government bonds, and Provident Fund represent direct government liabilities or debt obligations to citizens.

Multiple choice

Interest on public debt is a part of

  1. transfer payments by the enterprises

  2. transfer payments by the Government

  3. National income

  4. interest payments by households
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Transfer payments are payments made without receiving any goods or services in return. Interest on public debt fits this definition because the government pays interest to bondholders without receiving any current service or product. National income calculation excludes transfer payments. Interest payments by households and enterprises are not transfer payments.

Multiple choice

What was the term used for moneylenders charging excessive interest, in Germany?

  1. Users

  2. Usurers

  3. USP

  4. Usage
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Usurers are moneylenders who charge excessively high interest rates on loans, often exploiting vulnerable borrowers. The term has historically carried negative connotations and was used to criticize lenders in medieval and early modern economic systems. The term derives from Latin 'usura' meaning interest.

Multiple choice

Initially, your loan application[a]/ sent to the loan officer,[b]/ who must check your credit standing[c]/ before making any preliminary decision.[d]

  1. a

  2. b

  3. c

  4. d
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The sentence should be in passive voice: 'Initially, your loan application was sent to the loan officer, who must check your credit standing before making any preliminary decision.' The helping verb 'was' is missing before 'sent'. The error is in part [b].

Multiple choice

Creditor is a person

  1. To whom the guarantee is given

  2. Who gives the guarantee

  3. In respect of whose default the guarantee is given

  4. Who given loan from of money or kind
Reveal answer Fill a bubble to check yourself
D Correct answer
Multiple choice

Directions: Choose the option similar in meaning to the given word.

Lien

  1. legal claim until a debt on it is repaid

  2. culprit

  3. creditor

  4. debtor
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A lien is a legal right or claim on a property (like a house) that must be paid off when the property is sold, securing a debt. Option A correctly defines this legal concept, while the other options refer to people rather than the claim itself.

Multiple choice

You'll have to add ............ all the money I owe you.

  1. with

  2. to

  3. over

  4. up
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The correct phrase is 'add up', meaning to calculate the total or sum. When you add up all the money someone owes, you're totaling the individual amounts. 'Add with', 'add to', and 'add over' are not correct for calculating totals in this context. 'Add up' can also mean 'to make sense' logically, but here it's about arithmetic.

Multiple choice

What is debt?

  1. Stock-flow hypothesis

  2. Flow hypothesis

  3. Stock hypothesis

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Debt is considered a stock variable in economics because it represents the accumulated value of borrowing at a specific point in time, not a flow over time. Stock variables are measured at a point in time, while flow variables are measured over a period of time.

Multiple choice

Amortized loan means ____________.

  1. loan with scheduled periodic payments of both principal and interest

  2. government finances the banks to refinance the local money lenders

  3. giving huge loans to costumers by taking security

  4. not providing cash to costumers, but providing a loan in the form of goods

  5. loans given by RBI
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Yes, its the correct choice. An amortized loan means a loan with scheduled periodic payments of both principal and interest.

Multiple choice

Money borrowed or lent for one day is called

  1. call money

  2. notice money

  3. term money

  4. Options (2) and (3)

  5. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Yes, if money is borrowed or lent for one day it is called call money. This option is correct.

Multiple choice

Many times we read about the 'Prime Lending rate' charged by the banks. What is the meaning of Prime Lending rate?

  1. The rate at which banks normally give loan to their most favoured customers.
  2. The rate at which banks get money from the RBI.
  3. The rate which is paid normally by the banks on their fixed deposits kept with them for a period of five years or above.

  1. Only 1

  2. Only 2

  3. Only 3

  4. All 1, 2 and 3
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Prime Lending Rate (PLR) is the interest rate at which banks lend to their most creditworthy customers (Statement 1 correct). Statement 2 is incorrect as banks get money from RBI at repo rate, not PLR. Statement 3 is incorrect as PLR is a lending rate, not a deposit rate for fixed deposits. PLR serves as the benchmark for pricing most loans.