Tag: owned fund and borrowed fund

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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

Which of the following is a source of formal sector loan?

  1. Relatives

  2. Banks

  3. Moneylenders

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

The loan extended by banks and co-operative institutions constitutes formal sector of credit. The functioning of these financial institutions is supervised by the Reserve Bank of India.

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

In rural areas, what is the major reason behind taking the credit?

  1. Telecommunication

  2. Crop production

  3. Establishment of factory

  4. For buying luxuries
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
  • About 60% of the Indian population is dependent on agriculture.
  • Most of the Indian farmers are small and marginal farmers.
  • Rural farmers savings are very less.
  • Rural farmers seek credit for the production of crops as there are no savings left with them from the last year.
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

Why is money called a 'medium of exchange' ?

  1. Because money can create loan

  2. Because money adds to the value of a commodity

  3. Because money is portable

  4. Because money acts as an intermediate in the process of exchange
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Money helps to facilitate trade because people in the economy generally recognize it as valuable. Money is called medium of exchange because money is a widely accepted token that can be used for exchange of any good or service. In old days, barter system was used as medium of exchange and later it was gold.

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.

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 'credit'?

  1. Agreement in which the borrower lends money, goods and services in return for the promise of future payment

  2. Agreement in which the lender lends money without the promise of future payment

  3. Agreement in which the moneylenders lends money to poor borrowers

  4. Agreement in which only banks lends money to borrowers
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
  • Credit means agreement between borrower and lender by which borrower lends money, goods and services in return for the promise of future payment.
  • If credit not repaid by the borrower then they are termed as defaulters.
  • Credit history of the borrowers will be affected.
  • In India, RBI supervises the credit of banking system.
Multiple choice commercial studies money loans from banks and financial institutions introduction to money - barter system owned fund and borrowed fund

_____ credit is crucial for the development of a country.

  1. Higher cost of

  2. Less

  3. Cheap

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

Credit means agreement between borrower and lender by which borrower lends money, goods and services in return for the promise of future payment.
Economic growth is crucial for the economic development of the country.
Cheap and affordable credit (cheap interest rates) is crucial 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

Which of the following is a source of informal sector of loan?

  1. Money lenders

  2. Cooperatives

  3. Banks

  4. Government
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
  • Money lenders are the indigenous bankers of India.
  • Usually, they lend money on short term basis. 
  • Collateral in form of gold is taken from borrowers.
  • Money lenders are not supervised or controlled by RBI in India.