Banking Financial Awareness · Commerce Accountancy

Credit, Debt, and Finance

1,382 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 business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

What is true about deferred annuity ?

  1. It is an annuity when the payments are made at the end of payment period.

  2. It is an annuity when the payments are made at the beginning of payment period.

  3. It is an annuity when the payments are made at the middle of payment period.

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

$\Rightarrow$  True statement about deferred annuity is,

$-\,It\,is\,an\,annuity\,when\,the\,payment\,are\,made\,at\,the\,end\,of\,payment\,period.$
$\Rightarrow$  A deferred annuity is an insurance contract designed for long-term savings. 
$\Rightarrow$  Unlike an immediate annuity, which starts annual or monthly payments almost immediately, investors can delay payments from a deferred annuity indefinitely. During that time, any earnings in the account are tax-deferred.

Multiple choice history economic system and economic policies american dominance, neo-imperialism and new economic policy insights on lpg changing economic policies

In context of business and banking, what is CRAR?

  1. Capital to Risk (Weighted) Asset Ratio

  2. Credit to Risk Asset Ratio

  3. Credit to Risk Assessment Ratio

  4. Capital to Risk Assessment Rate
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Capital Adequacy Ratio (CAR), also called Capital to Risk (Weighted) Asset Ratio (CRAR) is a ratio of Bank's capital to its risk. Capital Adequacy Ratios are a measure of the amount of Bank's core capital expressed as a percentage of its risk-weighted asset.

Multiple choice history economic system and economic policies american dominance, neo-imperialism and new economic policy insights on lpg changing economic policies

World Bank provides ___________ on reasonable terms to its member countries.

  1. long term investment loan

  2. short term investment loan

  3. infrastructure loan

  4. mid-term investment loan
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

World Bank is an financial institution which was founded in 1945 at Bretton Woods. The headquarter of World Bank is in Washington DC. The main function of World Bank is to provide long term investment loans to its member countries. It comprises of two institutions: the International Bank for Reconstruction and Development and the International Development Association.

Multiple choice organization of commerce and management entrepreneurship opportunities for an entrepreneur small business and enterprises entrepreneurship development

Which of the following is way of funding social entrepreneurs?
I.   Loan Guarantees
II.  Quasi-equity debt
III. Pooling
Select the correct answer from the option given below -

  1. I

  2. II

  3. III

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

The innovative methods used in social enterprises to broaden the access of capital includes:-

Loan Guarantee:- It is a type of finance in which one party promises to assume the debt obligation of the borrower if the borrower defaults.
Quasi- equity Debt:- It is a type of financing which posses both the characteristics of debt and equity.
Polling:- It is a type of financing where there is grouping of resources for the purpose of maximum advantage or minimum risk.

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

Which one of the following statements is correct? When creditors' velocity or creditors' turnover is higher as compared to debtors' velocity, it would ______________.

  1. improve liquidity

  2. reduce liquidity

  3. have no effect on liquidity

  4. improve financial position
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Creditors' velocity refers to how quickly a firm pays its creditors, while debtors' velocity refers to how quickly it collects from debtors. Changes in these relative speeds affect working capital management but do not inherently change the liquidity position of the firm in a direct, predictable way.

Multiple choice commercial studies money loans from banks and financial institutions introduction to money - barter system owned fund and borrowed fund

Banks charge a higher interest rate on loans than what they offer on __________.

  1. withdrawals

  2. deposits

  3. loans

  4. demand drafts
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
  • The interest charged by the bank from its borrowers is higher than the interest it pays to its depositors.
  • The difference between the interest paid by the bank to its depositors and interest paid by the borrowers to the bank is the income of the bank.
Multiple choice commercial studies money loans from banks and financial institutions introduction to money - barter system owned fund and borrowed fund

 Which one of the following statement is incorrect about Reverse Mortgage? 

  1. It is a kind of loan through which one can get cash flow serially in return for pledging a property to a bank.

  2. It is the conveyance of an asset by a borrower to a lender as security for a loan.

  3. This scheme originated in the USA.
  4. The eligibility criteria set by the RBI states that the person should be above $60$ years of age and own a home to avail this mortgage.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The policy was implemented in India in 20072007 with the objective of providing financial security to the senior citizens who own a house. This functions just opposite to the case of 'mortgage' while borrowing money from bank to buy a housei.e., the beneficiary borrows a lump-sum loan by mortgaging his/her house and the loan is repaid in equal monthly installments (EMIs). In case the beneficiary dies before clearing the dues. his/her kins may repay the rest amount of the loan and own the house. 

Multiple choice commercial studies money loans from banks and financial institutions introduction to money - barter system owned fund and borrowed fund

Which of the following is not correct about 'security' of a bank loan?

  1. Banks consider personal guarantee as the primary security for the loans they forward.

  2. Collaterals in the from of fixed assets are the secondary security for a loan.

  3. Unsecured loans are supported by only primary security.

  4. Every loan forwarded by banks are supported primary and secondary securities.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

'Signature' of the borrower is the primary security for any loan (such loans are known as 'unsecured loans; or even 'signature loans' ). All loans might not be supported by the secondary securities (fixed assets).

Multiple choice commercial studies money loans from banks and financial institutions introduction to money - barter system owned fund and borrowed fund

For the development of a country the credit should be _____.

  1. For a short period

  2. Easily available

  3. Cheap and affordable

  4. For a long period
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Economic growth is prerequisite for the economic development of the country.
Cheap and affordable credit (low-interest rates) is one of the prerequisites for economic growth of any country. 

Multiple choice commercial studies money loans from banks and financial institutions introduction to money - barter system owned fund and borrowed fund

An asset that a borrower uses as a guarantee is called _____.

  1. collateral

  2. debit card

  3. credit card

  4. deposits
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
  • Collateral is an asset taken by the banks / money lenders for lending money to its customers.
  • Collateral is a type of a security taken by the banks from its customers.
  • Collateral can be in the form of fixed deposit, property documents, etc.
Multiple choice commercial studies money loans from banks and financial institutions introduction to money - barter system owned fund and borrowed fund

Which of the following does the terms of credit NOT include?

  1. Interest rate

  2. Collateral

  3. Documentation

  4. Lender's land
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

  • 1:Credit refers to a loan, an agreement in which the lender supplies the borrower with money, goods or services which is to be returned in future
    2:Terms of credit include interest rate, collateral (security) and documentation related to the lending of money.
Multiple choice commercial studies money loans from banks and financial institutions introduction to money - barter system owned fund and borrowed fund

The terms of credit comprise of _____.

  1. fixed deposit

  2. voter card

  3. collateral

  4. pan card
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
Interest rate, collateral and documentation requirement and the mode of repayment together comprise what is called the terms of credit.
They may vary depending on the nature of the lender and the borrower.
Multiple choice commercial studies money loans from banks and financial institutions introduction to money - barter system owned fund and borrowed fund

What do you mean by 'collateral'?

  1. It is a liability that the borrower bears while taking loan

  2. It is a document used in the process of taking credit

  3. An asset that a borrower owns and the lender uses it as a guarantee until the loan is re-paid

  4. It is an asset
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

1:Collateral is a type of a security/guarantee taken by the banks from its customers.
2:Usually collateral are taken by the banks for lending money to its customers.
3:Collateral can be in the form of fixed deposit documents, property, documents, etc.

Multiple choice commercial studies money loans from banks and financial institutions introduction to money - barter system owned fund and borrowed fund

Credit from _______________ pushes the borrower into a painful situation.

  1. cooperatives

  2. SHG

  3. moneylenders

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

When a poor person takes a loan he does find it convenient to go to a bank basically because he is uneducated and even does not have a collateral to present in a bank.
Hence he reaches out to the informal sources of credit which are basically the moneylenders. When he goes to moneylenders the rates of interest charged by them is very high but since the borrower is in need he has no other option.