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.