Banking Financial Awareness ยท 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

Which of the following is NOT a type of bankruptcy fraud?

  1. Asset Stripping

  2. Fraudulent Conveyance

  3. Ponzi Scheme

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

Insider trading is not a type of bankruptcy fraud. The other three options are types of bankruptcy fraud.

Multiple choice

What is the term used to describe the act of using bankruptcy to avoid paying child support?

  1. Child Support Evasion

  2. Child Support Fraud

  3. Bankruptcy Child Support Fraud

  4. Child Support Avoidance
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Bankruptcy child support fraud is the act of using bankruptcy to avoid paying child support.

Multiple choice

Which of the following is NOT a red flag for bankruptcy fraud?

  1. Unexplained transfers of assets

  2. Sudden changes in financial records

  3. Filing for bankruptcy multiple times

  4. High levels of debt
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

High levels of debt is not a red flag for bankruptcy fraud. The other three options are red flags for bankruptcy fraud.

Multiple choice

Which of the following is NOT a consequence of bankruptcy fraud?

  1. Loss of assets

  2. Criminal charges

  3. Bad credit

  4. Loss of employment
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Loss of employment is not a consequence of bankruptcy fraud. The other three options are consequences of bankruptcy fraud.

Multiple choice

Which type of loan is typically used for short-term borrowing needs?

  1. Overdraft

  2. Cash credit

  3. Term loan

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

Overdrafts allow customers to withdraw more money than they have in their account, up to a predetermined limit, and are typically used for short-term borrowing needs.

Multiple choice

A debt-to-GDP ratio of 60% is generally considered to be:

  1. Sustainable

  2. Unsustainable

  3. Moderately sustainable

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

A debt-to-GDP ratio of 60% is generally considered to be moderately sustainable, as it is above the safe threshold of 40% but below the unsustainable threshold of 80%.

Multiple choice

Which of the following is NOT a common indicator of external debt sustainability?

  1. Debt-to-export ratio

  2. Debt service-to-export ratio

  3. Current account balance

  4. Foreign exchange reserves
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Current account balance is not a common indicator of external debt sustainability, as it is more commonly used for assessing a country's overall economic health.

Multiple choice

Debt restructuring involves:

  1. Rescheduling the repayment of debt

  2. Reducing the interest rate on debt

  3. Forgiving a portion of debt

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

Debt restructuring involves rescheduling the repayment of debt, reducing the interest rate on debt, and/or forgiving a portion of debt.

Multiple choice

Which of the following is NOT a common type of debt sustainability indicator?

  1. Debt-to-GDP ratio

  2. Interest-to-revenue ratio

  3. Current account balance

  4. Human capital index
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Human capital index is not a common type of debt sustainability indicator, as it is more commonly used for assessing a country's overall economic development.

Multiple choice

What is the required minimum distribution (RMD) for an annuity?

  1. The minimum amount that must be withdrawn from an annuity each year

  2. The maximum amount that can be withdrawn from an annuity each year

  3. The amount that must be paid to the insurance company each year

  4. The amount that is taxed each year
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The required minimum distribution (RMD) is the minimum amount that must be withdrawn from an annuity each year, beginning at age 72.

Multiple choice

Which of the following is NOT a type of appraisal fee?

  1. Flat fee

  2. Hourly fee

  3. Percentage of the loan amount

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

Contingency fees are not typically used in real estate appraisals. Appraisers are generally compensated through flat fees, hourly fees, or a percentage of the loan amount.

Multiple choice

What are the advantages of a short sale for the borrower?

  1. The borrower can avoid foreclosure

  2. The borrower can get out of debt

  3. The borrower can improve their credit score

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

A short sale can help the borrower avoid foreclosure, get out of debt, and improve their credit score.

Multiple choice

What are the disadvantages of a short sale for the borrower?

  1. The borrower may have to pay a deficiency judgment

  2. The borrower may have to pay taxes on the forgiven debt

  3. The borrower may have difficulty getting a new mortgage

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

A short sale can result in a deficiency judgment, taxes on the forgiven debt, and difficulty getting a new mortgage.

Multiple choice

What are the advantages of a short sale for the lender?

  1. The lender can avoid the costs of foreclosure

  2. The lender can get rid of a non-performing loan

  3. The lender can recoup some of the money owed on the mortgage

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

A short sale can help the lender avoid the costs of foreclosure, get rid of a non-performing loan, and recoup some of the money owed on the mortgage.

Multiple choice

What are the disadvantages of a short sale for the lender?

  1. The lender may not get the full amount owed on the mortgage

  2. The lender may have to pay closing costs

  3. The lender may have to wait a long time to sell the property

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

A short sale can result in the lender not getting the full amount owed on the mortgage, having to pay closing costs, and having to wait a long time to sell the property.