Question 1

The risk that a bank will have to sell its assets at a loss to meet its cash demands is called

Accepted Answer

Liquidity risk refers to the risk that a bank will not be able to meet its cash needs because its assets cannot be sold quickly enough or at a price that allows the bank to recover its investment. This can lead to forced sales of assets at a loss, which can undermine a bank's financial stability.

Question 2

____________________ refers to using deposits to generate revenue by putting deposits to work via loans.

Accepted Answer

The answer of ____________________ refers to using deposits to generate...

Question 3

Services provided by banks that generate revenue but that are not included on their balance sheets are called ____________________.

Accepted Answer

The answer of Services provided by banks that generate revenue...

Question 4

The concept that the borrowers who are most willing to accept a high interest rate are the same borrowers who are most likely to default on their loans is called

Accepted Answer

Adverse selection refers to the phenomenon where the borrowers who are most likely to default on their loans are also the ones who are most willing to pay a high interest rate. This is because borrowers who have a high risk of defaulting on their loans are willing to pay a higher interest rate to compensate lenders for the risk they are taking by lending them money. On the other hand, borrowers who have a low risk of defaulting on their loans will not be willing to pay as high an interest rate, as they do not need to compensate lenders for as much risk. As a result, adverse selection can lead lenders to attract borrowers who are more likely to default, which can increase the overall riskiness of their loan portfolios.

Question 5

Dominic has a balance of $1,460.20 on his credit card. The minimum payment requirement is 6%, and the card's APR is 18%. If he makes the minimum payment, how much of it will go toward reducing the balance? Round your answer to the nearest hundredth.

Accepted Answer

The answer of Dominic has a balance of $1,460.20 on...

Question 6

When banks refuse to provide a loan, or when they lend less than the customer requested, they are engaging in ____________________.

Accepted Answer

The answer of When banks refuse to provide a loan,...

Question 7

A(n) ____________________ loan is a loan for which the amount of the payments, the rate of interest, and the number of payments are fixed.

Accepted Answer

The answer of A(n) ____________________ loan is a loan for...

Question 8

Markita has a balance of $3,400 on her credit card. The minimum payment requirement is 5%, and the card's APR is 17%. If she makes the minimum payment, how much of it will go toward paying the interest? Round your answer to the nearest hundredth.

Accepted Answer

The answer of Markita has a balance of $3,400 on...

Question 9

The annual ____________________ rate is the amount of interest charge on a loan principal expressed as a yearly figure.

Accepted Answer

The answer of The annual ____________________ rate is the amount...

Question 10

Becky has a balance of $2,000 on her credit card. The minimum payment requirement is 4%. How much is the minimum payment?

Accepted Answer

The answer of Becky has a balance of $2,000 on...

Question 11

The process of reviewing a loan for soundness is called ____________________.

Accepted Answer

The answer of The process of reviewing a loan for...

Question 12

A(n) ____________________ period is an amount of time you have to pay a credit card bill in full and avoid any finance charges.

Accepted Answer

The answer of A(n) ____________________ period is an amount of...

Question 13

Suppose you borrow $1,000 and pay the loan back in 12 equal payments of $95.50. What is the finance charge for this loan?

Accepted Answer

The answer of Suppose you borrow $1,000 and pay the...

Question 14

The amount you borrow in a loan is called the ____________________.

Accepted Answer

The answer of The amount you borrow in a loan...

Question 15

____________________ are records of all who have requested a copy of a credit report within the last year.

Accepted Answer

The answer of ____________________ are records of all who have...

Question 16

A home equity loan is essentially a second ____________________.

Accepted Answer

The answer of A home equity loan is essentially a...

Question 17

What are home equity loans based upon?

Accepted Answer

The answer of What are home equity loans based upon?...

Question 18

What is a finance charge?

Accepted Answer

The answer of What is a finance charge?...

Question 19

Suppose you borrow $5,000 and make 12 equal payments to retire the debt. If the finance charge for the loan is $400, what will the amount of each monthly payment be?

Accepted Answer

The answer of Suppose you borrow $5,000 and make 12...

Question 20

Specific property that secures a loan is called ____________________.

Accepted Answer

The answer of Specific property that secures a loan is...

Quiz 7: Bank Loans