Question 1

Collateral does not reduce the risk of a loan per se, because

Accepted Answer

A)  it is not part of the loan agreement 
B)  the risk of a loan is determined by the borrower's willingness and ability to repay the loan 
C)  it may be worth less than the bank thinks 
D)  the bank may not have title to the collateral 
A)  it is not part of the loan agreement 
B)  the risk of a loan is determined by the borrower's willingness and ability to repay the loan 
C)  it may be worth less than the bank thinks 
D)  the bank may not have title to the collateral B

Question 2

Collateral refers to any asset pledged for security in a credit transaction.

Accepted Answer

A) True 
 B)False  True

Question 3

The packaging and sale of other unmarketable small size loans is called participations.

Accepted Answer

A) True 
 B)False  False

Question 4

Which type of lease should be used to finance automobiles for a period of two years?

Accepted Answer

A)  financial lease 
B)  leverage lease 
C)  operating lease 
D)  commercial lease 
A)  financial lease 
B)  leverage lease 
C)  operating lease 
D)  commercial lease

Question 5

The requirement that a borrower must present the bank with quarterly financial statements is an example of a restrictive covenant.

Accepted Answer

A) True 
 B)False

Question 6

A Material Adverse Change clause refers to a change in the borrower's attitudes about repaying a loan.

Accepted Answer

A) True 
 B)False

Question 7

Prepayment of loans may be initiated by

Accepted Answer

A)  borrowers and lenders 
B)  bank regulators 
C)  bank auditors 
D)  the SEC 
A)  borrowers and lenders 
B)  bank regulators 
C)  bank auditors 
D)  the SEC

Question 8

Bridge loans are used to finance assets until a specific event occurs.

Accepted Answer

A) True 
 B)False

Question 9

Performance pricing is based on the financial condition of the borrower.

Accepted Answer

A) True 
 B)False

Question 10

Overdrafts are a result of

Accepted Answer

A)  banks paying on checks or wire transfers drawn on uncollected balances. 
B)  loans made against certificates of deposit 
C)  banks paying wire transfers made during one business day 
D)  banks extending credit beyond the amount specified in a line of credit 
A)  banks paying on checks or wire transfers drawn on uncollected balances. 
B)  loans made against certificates of deposit 
C)  banks paying wire transfers made during one business day 
D)  banks extending credit beyond the amount specified in a line of credit

Question 11

Banks avoid credit risk by increasing their credit standards, doing a through credit analysis, and selling their loans to others.

Accepted Answer

A) True 
 B)False

Question 12

A credit facility is another name for:

Accepted Answer

A)  a branch bank. 
B)  wholesale banking. 
C)  credit cards. 
D)  Loans and agreements to make loans. 
A)  a branch bank. 
B)  wholesale banking. 
C)  credit cards. 
D)  Loans and agreements to make loans.

Question 13

Interest cost calculated on a 360-day basis is less than if it were calculated on a 365 day basis.

Accepted Answer

A) True 
 B)False

Question 14

Written loan policies should contain

Accepted Answer

A)  information about insider borrowing 
B)  information about credit limits 
C)  information about loan supervision 
D)  all of the above 
A)  information about insider borrowing 
B)  information about credit limits 
C)  information about loan supervision 
D)  all of the above

Question 15

A commercial (in contrast to consumer) line of credit is an agreement between a customer and a bank that

Accepted Answer

A)  may not obligate the bank to honor the customer's request for a loan 
B)  gives the customer the right to borrow up to a predetermined amount. 
C)  is renewed at the end of the contract period in an evergreen facility. 
D)  is usually for one year or longer. 
A)  may not obligate the bank to honor the customer's request for a loan 
B)  gives the customer the right to borrow up to a predetermined amount. 
C)  is renewed at the end of the contract period in an evergreen facility. 
D)  is usually for one year or longer.

Question 16

Dun & Bradstreet reports provide

Accepted Answer

A)  information about firms with an emphasis on the history of payments and financial condition, liens, bankruptcies, etc. 
B)  information about the industry in which firms operate 
C)  financial operating statistics and ratios according to firm size on more than 300 lines of business 
D)  information about industries, and credit profiles of competitors. 
A)  information about firms with an emphasis on the history of payments and financial condition, liens, bankruptcies, etc. 
B)  information about the industry in which firms operate 
C)  financial operating statistics and ratios according to firm size on more than 300 lines of business 
D)  information about industries, and credit profiles of competitors.

Question 17

Loan review refers to

Accepted Answer

A)  the process of approving loan applications 
B)  the review of all of the documentation 
C)  the establishment of geographic limits and categories of risk before loans are granted 
D)  an audit of practices and procedures made after the loan has been extended. 
A)  the process of approving loan applications 
B)  the review of all of the documentation 
C)  the establishment of geographic limits and categories of risk before loans are granted 
D)  an audit of practices and procedures made after the loan has been extended.

Question 18

Factoring refers to the use of inventory as collateral.

Accepted Answer

A) True 
 B)False

Question 19

Credit analysis should be based on quarterly and annual financia statements provided by the prospective borrower.

Accepted Answer

A) True 
 B)False

Question 20

Bankers' Acceptance is a form of trade finance.

Accepted Answer

A) True 
 B)False

Collateral does not reduce the risk of a loan per se, because

Collateral refers to any asset pledged for security in a credit transaction.

The packaging and sale of other unmarketable small size loans is called participations.

Which type of lease should be used to finance automobiles for a period of two years?

The requirement that a borrower must present the bank with quarterly financial statements is an example of a restrictive covenant.

A Material Adverse Change clause refers to a change in the borrower's attitudes about repaying a loan.

Prepayment of loans may be initiated by

Bridge loans are used to finance assets until a specific event occurs.

Performance pricing is based on the financial condition of the borrower.

Overdrafts are a result of

Banks avoid credit risk by increasing their credit standards, doing a through credit analysis, and selling their loans to others.

A credit facility is another name for:

Interest cost calculated on a 360-day basis is less than if it were calculated on a 365 day basis.

Written loan policies should contain

A commercial (in contrast to consumer) line of credit is an agreement between a customer and a bank that

Dun & Bradstreet reports provide

Loan review refers to

Factoring refers to the use of inventory as collateral.

Credit analysis should be based on quarterly and annual financia statements provided by the prospective borrower.

Bankers' Acceptance is a form of trade finance.

Functions and Forms of Banking

The Bank Regulatory Environment

Evaluating Bank Performance

Bank Valuation

An Overview of Assetliability Management Alm

Techniques of Assetliability Management: Futures, Options, and Swaps

Investment Management

Credit Evaluation Process

Real Estate and Consumer Lending

Liquidity Management

Capital Management

Managing Liabilities

Off-Balance Sheet Activities

Securities, Investment Insurance Products

Other Financial Services

Electronic Banking

Global Financial Services

Filters

Exam 9: Commercial and Industrial Lending

Collateral does not reduce the risk of a loan per se, because

Collateral refers to any asset pledged for security in a credit transaction.

The packaging and sale of other unmarketable small size loans is called participations.

Which type of lease should be used to finance automobiles for a period of two years?

The requirement that a borrower must present the bank with quarterly financial statements is an example of a restrictive covenant.

A Material Adverse Change clause refers to a change in the borrower's attitudes about repaying a loan.

Prepayment of loans may be initiated by

Bridge loans are used to finance assets until a specific event occurs.

Performance pricing is based on the financial condition of the borrower.

Overdrafts are a result of

Banks avoid credit risk by increasing their credit standards, doing a through credit analysis, and selling their loans to others.

A credit facility is another name for:

Interest cost calculated on a 360-day basis is less than if it were calculated on a 365 day basis.

Written loan policies should contain

A commercial (in contrast to consumer) line of credit is an agreement between a customer and a bank that

Dun & Bradstreet reports provide

Loan review refers to

Factoring refers to the use of inventory as collateral.

Credit analysis should be based on quarterly and annual financia statements provided by the prospective borrower.

Bankers' Acceptance is a form of trade finance.

Functions and Forms of Banking

The Bank Regulatory Environment

Evaluating Bank Performance

Bank Valuation

An Overview of Assetliability Management Alm

Techniques of Assetliability Management: Futures, Options, and Swaps

Investment Management

Credit Evaluation Process

Real Estate and Consumer Lending

Liquidity Management

Capital Management

Managing Liabilities

Off-Balance Sheet Activities

Securities, Investment Insurance Products

Other Financial Services

Electronic Banking

Global Financial Services

Filters