Banking Exercise

23. June 2008 – 14:18

Revision Questions

  • Describe the basic functions of banks.
  • Why is it easier for banks than for private individuals to take on the risk of default?
  • Explain the terms “sight deposits” and “deposit base”.
  • Explain the balance sheet of a bank using the terms:
  • deposits, loans, liabilities, assets, owner’s funds, creditor’s funds.
  • The interest rate of a loan varies according to …………………………………………………………………………….
  • Why are overdraft facilities on current accounts a very convenient way of financing for a business?
  • Outline the economic importance of a collateral loan.
  • Explain the handling and the economic importance of a mortgage loan.
  • You are granted a mortgage loan of EUR 2,000,000 with an interest rate of 10 % p.a., the monthly annuity is EUR 20,000. Use this example to explain the annuity loan.
  • Use the overdraft facility on current accounts and the mortgage loan to highlight the difference between a revolving and a single credit.

 

 

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