In: Finance
QUESTION 1: MCQ
Provided that the bank is a financial intermediary, the primary service the bank offers in order to make profits is:
i) Granting loans and advances to clients
The banks charge interests on loans and advances given to clients and then they make profits, otherwise, operating a bank will become a non-profit institution.
Deposits at the bank are considered ______ of funds for the bank, while Bank Bonds and Borrowings are regarded as _____ of funds and loans as _____ of funds for the bank.
iii) Sources, sources, uses
Deposits at the bank are deposits made by clients on which the interest is being given to clients. Bonds and Borrowings from central bank or other bank will help bank to grant loans to clients, which is USES of funds.
A letter of guarantee is:
i) A payment undertaking
A letter of guarantee is a letter issued by the bank that ensures that your supplier will get paid, if your company cant pay for their good and serives paid to your company.
When having a current account:
iii) A mandate from the customer - the account owner - needs to be obtained in order to perform a transfer of money to another bank account
A mandate or a letter from the customer should be obtained so that bank can frequently transfer money to another bank account for current usage.
Banks Savings products offered to customers are:
iii) Savings accounts and Certificate of Deposits
Saving products and certificate of deposits are bank saving products in which bank takes money from the customers and provide them interest on the amount kept in it.