The Credit Applicant's ________ Is the Amount of Assets the Applicant

question 44

Multiple Choice

The credit applicant's ________ is the amount of assets the applicant has available for use in securing the credit.

• A) character
• B) capacity
• C) capital
• D) collateral

Explain the relationship between loans and deposits in the banking system.

Understand how banks earn profits and the significance of the interest rate spread.

Recognize the role and impact of the Federal Reserve's actions on banks' reserves and the broader financial market.

Describe the concept of asymmetric information in financial markets and its consequences for lending.

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Definitions:

Note Payable

A legal obligation representing a loan or promissory note that requires the borrower to repay the lender a certain amount of money at a future date or on demand.

Cash Payment

A transaction in which money is paid immediately at the time of purchase, not on credit.

Journal Entry

A record in accounting that documents a business transaction, including the accounts and amounts affected.

Prepaid Insurance

The cost of insurance premiums that have been paid in advance for future coverage, recorded as an asset on the balance sheet.