BTF2-2

What right does the bank have according to the bank/customer fiduciary relationships?

• To use the customer's money illegally.

• To be repaid overdrawn balances on demand.

• To refuse repayment of overdraft balances.

• To charge unreasonable bank fees.

Why is financing permanent current assets and some fluctuating current assets with long-term sources considered less profitable but less risky?

• Long-term sources provide lower interest rates

• Long-term financing is more flexible in meeting long-term needs

• Long-term financing requires less frequent renegotiation

What is a method of reducing credit risks in international trade?

• Ignoring the creditworthiness of customers

• Obtaining export credit insurance

• Extending credit terms to customers

• Using leasing and buy-back method

Which of the following statements about preference shares as a source of capital for a company is correct?

• Preference shares are a form of equity capital that carry lower risk than ordinary shares.

• Preference shares are a form of loan capital that carry higher risk than ordinary shares.

• Preference shares are a form of loan capital that carry lower risk than ordinary shares.

• Preference shares are a form of equity capital that carry higher risk than ordinary shares.

How does financial intermediation contribute to reducing risk?

• By increasing search costs for borrowers.

• By diversifying individual savings across multiple borrowers.

• By tying up individual savings with one borrower directly.

• By enabling businesses to bypass banks for loan finance.

Which type of banks do not participate in the clearing system?

• Commercial banks

• Retail banks

• Tertiary banks

• Secondary banks

Which of the statements are true?

• Statements (1),(2),and (3).

• Statements (1) and (2) only.

• Statements(1)and (3)only.

• Statements (2) and (3) only.

What is the nature of the mortgagor/mortgagee relationship between the bank and the customer?

• The customer acts as an agent for the bank in financial transactions.

• The customer secures a loan with assets, and the bank has the right to sell them if the loan is not repaid.

• The bank safeguards the customer's property in its safe deposit.

• The bank is responsible for repaying the customer's loan.

What advantage does going public offer to a company?

• Decreased marketability of shares

• Limited access to finance

• Improved standing of the company

• Reduced scrutiny of affairs

Financial intermediation allows small amounts deposited by savers to be combined to provide:

• Larger loan packages to governments.

• Increased liquidity for financial institutions.

• Larger loan packages to businesses.

• Higher interest rates for individual savers.