An Interesting Quiz On Credit And Loans

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An Interesting Quiz On Credit And Loans - Quiz

We welcome you to this fun Financial literacy credit and loans MCQ Quiz. Being financially literate can have many implications. Being aware of credit and loans can be of utmost importance in the financial world. After all, they keep track of the ebb and flow of the money. Do you know well enough about the topic? If you know enough, we highly encourage you to take the quiz and test your knowledge! We hope that you get the opportunity to enhance your knowledge by playing this quiz! All the best!


Questions and Answers
  • 1. 

    Commercial banks can only provide the credit only to which of the following?

    • A.

      Government

    • B.

      Private businessman

    • C.

      Trade, Agriculture and Industry

    • D.

      None of the above

    Correct Answer
    A. Government
    Explanation
    Commercial banks can only provide credit to the government because the government is considered a reliable borrower with the ability to repay loans. Governments often borrow from banks to finance public projects, infrastructure development, and other expenditures. Commercial banks may be more willing to lend to the government due to the lower risk associated with government borrowing compared to private individuals or businesses. Therefore, the correct answer is government.

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  • 2. 

    The loan that becomes repayable by the bank's demand is known as what? 

    • A.

      Demand Loan

    • B.

      Continuous Loan

    • C.

      Credit loan

    • D.

      None of the above

    Correct Answer
    A. Demand Loan
    Explanation
    A demand loan is a type of loan that can be called or demanded for repayment by the bank at any time. Unlike other types of loans that have a fixed repayment schedule, a demand loan gives the bank the flexibility to request repayment whenever they choose. This type of loan is often used for short-term financing or by businesses that may need immediate access to funds.

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  • 3. 

    Which of the following is amongst the terms of credit? 

    • A.

      Collateral 

    • B.

      Interest rate 

    • C.

      Required documents

    • D.

      All of the above

    Correct Answer
    D. All of the above
    Explanation
    All of the options mentioned in the question - collateral, interest rate, and required documents - are terms commonly associated with credit. Collateral refers to an asset that is pledged as security for a loan, while interest rate is the cost of borrowing money. Required documents are the paperwork or documentation needed to apply for and secure credit. Therefore, all of these options are terms that are relevant and applicable to credit.

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  • 4. 

    Which of the following is an example of the informal loan sector? 

    • A.

      Bank

    • B.

      Cooperatives

    • C.

      Money lenders

    • D.

      All of the above

    Correct Answer
    C. Money lenders
    Explanation
    Money lenders are an example of the informal loan sector because they provide loans outside of the traditional banking system. They often operate on a smaller scale and may not require extensive documentation or collateral. This sector is typically characterized by more flexible lending terms and higher interest rates compared to formal financial institutions like banks or cooperatives.

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  • 5. 

    Which of the following is NOT a type of short-term, spontaneous credit?

    • A.

      Accrued taxes

    • B.

      Trade credit

    • C.

      Commercial paper

    • D.

      Accrued wages.

    Correct Answer
    C. Commercial paper
    Explanation
    Commercial paper is a type of short-term, unsecured promissory note issued by large corporations to raise funds. It is typically used to meet short-term liquidity needs. On the other hand, accrued taxes, trade credit, and accrued wages are all examples of short-term, spontaneous credit. Accrued taxes refer to taxes that have been incurred but not yet paid, trade credit is the credit extended by suppliers to their customers, and accrued wages are wages that have been earned but not yet paid.

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  • 6. 

    Which of the following is the short-term interest rate charged by banks to its creditworthy customers?

    • A.

      Long-term bond rate.

    • B.

      Fed funds rate

    • C.

      Prime rate

    • D.

      Discount basis interest rate

    Correct Answer
    C. Prime rate
    Explanation
    The prime rate is the short-term interest rate charged by banks to their creditworthy customers. It is typically used as a benchmark for various loans and credit products. This rate is influenced by factors such as the federal funds rate, inflation, and the overall health of the economy.

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  • 7. 

    A lien on specifically identified personal property that backs a loan is referred to as what?

    • A.

      Floating lien

    • B.

      Chattel mortgage

    • C.

      Trust receipt

    • D.

      Terminal warehouse receipt

    Correct Answer
    B. Chattel mortgage
    Explanation
    A chattel mortgage is a lien on specifically identified personal property that backs a loan. This means that if the borrower defaults on the loan, the lender has the right to take possession of the personal property that was used as collateral. A chattel mortgage is commonly used for financing the purchase of movable assets such as vehicles or equipment. Unlike a floating lien, which covers a broader range of assets, a chattel mortgage is specific to the identified personal property. A trust receipt and terminal warehouse receipt are not the correct terms for this type of lien.

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  • 8. 

    In the case of a pledge, the possession of security is usually with whom?

    • A.

      The third party

    • B.

      The creditor

    • C.

      The debtor

    • D.

      None of the above

    Correct Answer
    B. The creditor
    Explanation
    In the case of a pledge, the possession of security is usually with the creditor. This means that the creditor holds the pledged asset or property as security until the debt is repaid. By having possession of the security, the creditor has a form of guarantee that they will be able to recover their funds if the debtor fails to fulfill their obligation.

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  • 9. 

    What do you mean by a floating charge? 

    • A.

      A charge on the shares of a company

    • B.

      A change that is changing

    • C.

      A charge on the current assets of the company that are constantly changing

    • D.

      None of the above

    Correct Answer
    C. A charge on the current assets of the company that are constantly changing
    Explanation
    A floating charge refers to a charge on the current assets of a company that are constantly changing. Unlike a fixed charge, which is attached to specific assets, a floating charge covers a fluctuating pool of assets, such as inventory or accounts receivable. This type of charge allows the company to continue operating and using these assets in the normal course of business until an event triggers the charge to become fixed, typically when the company defaults on its obligations.

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  • 10. 

    Which of the following is the weakest method of charging security?

    • A.

      Hypothecation

    • B.

      Mortgage

    • C.

      A Pledge

    • D.

      None of the above

    Correct Answer
    A. Hypothecation
    Explanation
    Hypothecation is the weakest method of charging security because it involves the borrower pledging an asset as collateral to the lender without transferring the ownership. In case of default, the lender has a claim on the asset, but it does not have direct ownership or possession. This makes it a weaker form of security compared to mortgage or pledge, where the lender has more control and rights over the pledged asset.

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