Question

25) A bank is operating well if it assumes ________.

a) all borrowers will be punctual with their loan payments

b) it will not need plan for missed payments

c) there will be borrowers who will not repay their loans in a timely fashion

26) What is the definition of credit?

a) Credit is a means of purchasing items in smaller sums over a longer period of time.

b) Credit is a means of purchasing services using a debit card.

c) Credit is a way to purchase goods or services now when you cannot afford to pay for it all at once with cash.

Answer 1

Question 25

A well operating bank always keep a provision for bad loans as it always maintain an assumption that there would be a small percentage of borrowers that would not pay their loans on time and thus there must be a plan to account for such missed payments.

Thus,

A bank is operating well if it assumes there will be borrowers who will not repay their loans in timely fashion.

Hence, the correct answer is the option (c).

Question 26

Credit implies purchase of things on borrowed money as person purchasing the goods does not have cash to pay the entire amount in one go.

Purchasing items in smaller sums or making payment using debit card implies payment at once either through cash or using money in bank account and thus does not constitute credit.

So,

Credit is a way to purchase goods or services now when you cannot afford to pay for it all at once with cash.

Hence, the correct answer is the option (c).