Banking Awareness Quiz – Set 71

Hello Aspirants,
Welcome to Banking Awareness Quiz in AffairsCloud.com. Here we are creating quiz covering important questions which are common for all the bank exams and other competitive exams.

1. A provision in some loans that allows the borrower to change the interest rate from fixed to variable or Vice Versa is termed as __________
   A. Convertible Bond
   B. Convertible Clause
   C. Convertible Security
   D. None of the Above
   
   Answer & Explanation

   B. Convertible Clause
   Explanation:
   A provision that can be found on some bonds allowing the bondholder to exchange their debt into common stock.
   
   
2. CRAR stands for _________
   A. Capital to Risk-Weighted Assets Ratio
   B. Capital to Risk Assets Ratio
   C. Credit Rating-Weighted Assets Ratio
   D. Credit Rating Assets Ratio
   
   Answer & Explanation

   A. Capital to Risk-Weighted Assets Ratio
   Explanation:
   The Capital Adequacy Ratio (CAR) or Capital-to-Risk weighted Assets Ratio (CRAR) is a measure of a bank’s capital. It is expressed as a percentage of a bank’s risk weighted credit exposures. It is used to protect depositors and promote the stability and efficiency of financial systems around the world.
   
   
3. An index that is used to determine interest rates and/or changes of interest rates of certain types of loans is known as _________
   A. Covenant
   B. CRAR
   C. COFI
   D. CRAs
   
   Answer & Explanation

   C. COFI
   Explanation:
   A cost of funds index or COFI is a regional average of interest expenses incurred by financial institutions, which in turn is used as a base for calculating variable rate loans.
   
   
4. _________ are long term corporate bonds that are unsecured in nature.
   A. DCF
   B. Debentures
   C. Covenant
   D. CRAs
   
   Answer & Explanation

   B. Debentures
   Explanation:
   A long-term security yielding a fixed rate of interest, issued by a company and secured against assets are known as debentures.
   
   
5. A type of loan, where the bank or the lending institution provides the borrower with a loan that helps the borrower to pay off his all previous debts is termed as ________
   A. Debt Recovery
   B. Debt Settlement
   C. Debt Management
   D. Debt Consolidation
   
   Answer & Explanation

   D. Debt Consolidation
   Explanation:
   Debt consolidation is a form of debt refinancing that entails taking out one loan to pay off many others.
   
   
6. An account for which a bank acts as an uninterested third party is termed as _______
   A. Savings Account
   B. Current Account
   C. Reserve Account
   D. Escrow Account
   
   Answer & Explanation

   D. Escrow Account
   Explanation:
   An escrow account is a temporary pass through account held by a third party during the process of a transaction between two parties. Definition: An escrow account is a temporary pass through account held by a third party during the process of a transaction between two parties.
   
   
7. The unpaid principal balance of a loan on property divided by the asset’s appraised value is termed as ______
   A. Liquidity Adjustment Facility
   B. Loss Given Default(LGD)
   C. Loan to Value(LTV)
   D. Long term liabilities
   
   Answer & Explanation

   C. Loan to Value(LTV)
   Explanation:
   The loan-to-value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. The term is commonly used by banks and building societies to represent the ratio of the first mortgage lien as a percentage of the total appraised value of real property.
   
   
8. A signed undertaking from one party containing a promise to pay a stated sum to a specified person or a company is known as ________
   A. Power of Attorney
   B. Promissory Note
   C. Purchasing Power Parity
   D. None of the Above
   
   Answer & Explanation

   B. Promissory Note
   Explanation:
   A promissory note is a legal instrument in which one party (the maker or issuer) promises in writing to pay a determinate sum of money to the other (the payee)
   
   
9. __________ is a transfer of property to its real owner, once the loan or mortgage is paid off.
   A. Reconveyance
   B. Repossession
   C. Recurring Billing
   D. Revalidation
   
   Answer & Explanation

   A. Reconveyance
   Explanation:
   The transfer of real property that takes place when a mortgage is fully paid off and the land is returned to the owner free from the former debt.
   
   
10. Which of the following is defined as the difference between current assets and current liabilities?
    A. Venture Capital
    B. Working Capital
    C. Equitable Mortgage
    D. None of the Above
    
    Answer & Explanation

    B. Working Capital
    Explanation:
    The capital of a business which is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities.