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 business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

An annuity whose payments continue till the happening of an event, the date of which cannot be foretold is called.

  1. Contingent Annuity

  2. Deferred Annuity

  3. Perpetual Annuity

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

An annuity whose payments continue till the happening of an event, the date of which cannot be foretold is called contingent annuity.

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

Annuity where payments are made at the end of each payment period, i.e. 1st payment is made at the end of the 1st payment interval, and so on, is known as 

  1. Perpetual annuity

  2. Contingent annuity

  3. Ordinary annuity

  4. Immediate annuity
Reveal answer Fill a bubble to check yourself
C,D Correct answer
Explanation

Answer is Ordinary or Immediate Annuity.

  1. An ordinary annuity or immediate annuity is where payments are made at the end of each payment period, i.e. 1st payment is made at the end of the 1st payment interval, and so on. Examples are repayment of car loans, house mortgage etc.
  2. A contingent annuity is one where the term depends upon some event whose occurrence is not fixed. An example is periodic payments of life insurance premiums which stop when the person dies.
  3. A perpetual annuity is an annuity whose term does not end, i.e. it extends till infinity. Thus there is no last payment; they go on forever. An example is freehold property, where you can earn rent in perpetuity.

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

Process of loan repayment by installment payments is classified as

  1. appreciation of loan

  2. amortizing a loan

  3. depreciation a loan

  4. appreciation of investment
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

$\Rightarrow$   Process of loan repayment by installment payment is classified as $amortizing\,a\,loan.$

$\Rightarrow$   All repayments of interest-bearing debts by a series of payments, usually in size, made at equal intervals of time is called an amortization. Mortgages and many consumer loans are repaid by this method.
$\Rightarrow$  An amortized loan is a loan with scheduled periodic payments that consist of both principal and interest. An amortized loan payment pays the relevant interest expense for the period before any principal is paid and reduced. 
$\Rightarrow$   This is opposed to loans with interest-only payment features, balloon payment features and even negatively amortizing payment features.

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

The dollar amount of mortgage loan multiplied monthly payment of mortgage loan per dollar is used to calculate

    1. semiannually mortgage payment

    2. daily mortgage payment

    3. monthly mortgage payment

    4. annually mortgage payment
    Reveal answer Fill a bubble to check yourself
    C Correct answer
    Explanation

    $\Rightarrow$  Dollar amount of mortgage loan multiplied monthly payment of mortgage loan per dollar is used to calculate $monthly\,mortgage\,payment.$

    $\Rightarrow$  The most common mortgage terms are 15 years and 30 years. Interest rate Annual fixed interest rate for this mortgage. Monthly payment (PI) Monthly principal and interest payment (PI). 
    $\Rightarrow$  Monthly payment (PITI) Monthly payment including principal, interest, homeowners insurance and property taxes.

    Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

    Which of the following is not an example of annuity certain ?

    1. Car Loan

    2. Daughter's Marriage

    3. House Loan

    4. All of above
    Reveal answer Fill a bubble to check yourself
    B Correct answer
    Explanation
    $\Rightarrow$  $Daughter's\,\,Marriage$ is not an example of annuity certain.
    $\Rightarrow$  Annuity certain is annuity that, as a minimum, guarantees a fixed number of payments. It continues over the life of the annuitant, even if he or she lives beyond the number of payments specified in the annuity contract. 
    $\Rightarrow$ In case the annuitant dies before exhausting the payments, a named beneficiary continues to receive the remaining number. Also called life annuity certain or life annuity certain and continuous.
    $\Rightarrow$  House loan and Car loan are examples of annuity certain.
    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 in which the first payment is postponed for period of times.

    2. It is annuity when payments are made at the end of each payment.

    3. It is annuity when payments are made at the beginning of each payment.

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

    Deferred payment annuities typically offer tax-deferred growth at a fixed or variable rate of return, just like regular annuities. Often deferred payment annuities are purchased for under-age children, with the benefit payments postponed until they reach a certain age. Deferred payment annuities can be helpful in retirement planning.
    Option (A) is correct

    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 commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

    Prepaid/Advance Salary A/c is classified as _______.

    1. Representative personal A/c

    2. Real A/c

    3. Nominal A/c

    4. Both (a) & (b)
    Reveal answer Fill a bubble to check yourself
    A Correct answer
    Explanation

    There are mainly three types of accounts in accounting: Real, Personal and Nominal accounts. Personal accounts  are classified into three subcategories: Artificial, Natural, and Representative. Personal accounts are related to individuals, firms, companies, etc. A few examples of personal  accounts include debtors, creditors, banks, outstanding/prepaid accounts, accounts of credit customers. accounts of goods suppliers, capital, drawings, etc. Representative Personal accounts are those which represent a certain person or a group directly or indirectly. E.g. Let's say that wages are paid in advance to an employee-a wage prepaid account will be opened in the books of accounts. This wages prepaid account is a representative personal account directly linked to the person. Prepaid.Advance Salary A/c are classified as representative personal A/c.

    Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

    _______ is a Nominal A/c.

    1. Insurance prepaid A/c

    2. Insurance premium A/c

    3. Bank A/c

    4. Rent outstanding A/c
    Reveal answer Fill a bubble to check yourself
    B Correct answer
    Explanation

    There are mainly three types of accounts in accounting: Real, Personal and Nominal accounts. 

    • Personal accounts are classified into three subcategories: Artificial, Natural and Representative.
    Accounts which are related to expenses, losses, incomes or gains are called Nominal accounts.
    Example, Purchase A/c, Salary A/c, Sales A/c, Commission Received A/c, etc. The final result of all nominal accounts is either profit or losses which is then transferred to the capital account.