Bank Lending Principles and Balance Sheet Quiz
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Questions and Answers

What is the most important consideration for a bank in deciding to lend to a client?

  • The client's credit history and reputation (correct)
  • The client's wealth and assets
  • The client's industry and business sector
  • The client's personal connections and networks
  • What should a bank do to minimize the risk of default from borrowers?

  • Formulate and implement a lending policy (correct)
  • Lend only to large, established companies
  • Require extensive collateral
  • Charge high interest rates
  • What is the most important use of a bank's money?

  • Lending to customers (correct)
  • Holding cash reserves
  • Funding the bank's own operations
  • Investing in stocks and bonds
  • How do banks typically try to ensure the safety and security of their lending?

    <p>By keeping securities and assets as collateral</p> Signup and view all the answers

    What advantage can a bank gain from lending to units in another state hit by disasters?

    <p>Ability to offset losses in one state with gains in another</p> Signup and view all the answers

    What is one of the most important functions of a bank?

    <p>Lending money to different kinds of borrowers</p> Signup and view all the answers

    What do banks collect from people by offering interest?

    <p>Deposits</p> Signup and view all the answers

    What do banks have to repay when demanded by the customers?

    <p>Amount of deposits</p> Signup and view all the answers

    What power do banks have that is important in the financial system?

    <p>Power of credit creation</p> Signup and view all the answers

    Why is it said that banks depend largely on lending?

    <p>To guarantee their depositors' funds</p> Signup and view all the answers

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