Loan and Interest Quiz
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Loan and Interest Quiz

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@ProlificOlive

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Questions and Answers

What is the purpose of interest in a loan?

  • To increase the total amount of money borrowed
  • To provide an incentive for the lender to engage in the loan (correct)
  • To discourage borrowers from taking out loans
  • To cover the administrative costs of the loan

    • What is a typical source of funding for institutions other than financial institutions?

  • Providing mortgage loans
  • Offering personal loans
  • Issuing debt contracts such as bonds (correct)
  • Issuing credit cards

    • What does a secured loan involve?

  • The loan is not subject to interest payments
  • The borrower pledges an asset as collateral (correct)
  • The borrower does not incur any debt
  • The lender provides the loan without any collateral

    • What is one of the main activities of financial institutions like banks?

    <p>Acting as a provider of loans</p> Signup and view all the answers

    What does the document evidencing the debt in a loan normally specify?

    <p>The principal amount of money borrowed and the interest rate</p> Signup and view all the answers

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