A Bank Lending Depositors' Money to a Local Business and a Pension

question 16

Multiple Choice

A bank lending depositors' money to a local business and a pension fund investing contributions in shares of a company are similar financial activities in that

• A)both involve the use of financial markets.
• B)both involve funds being channeled from savers to borrowers through financial intermediaries.
• C)both involve a reduction in the overall level of liquidity in the financial system.
• D)both involve in an increase in the overall level of risk in the financial system.

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Definitions:

Canceled Account Balance

The remaining amount of money in an account that has been closed or terminated.

Collection Letters

Written notices sent by creditors to debtors requesting payment of overdue balances.

Overlooked

Failed to be noticed or considered; omitted due to inattention.

Delinquent Balances

Unpaid amounts of money that are past due and have not been settled within the agreed time frame.