Loans & Lending Practices MCQs (Chapterwise Multiple Choice Questions)

Why is interest earned on a loan considered taxable revenue?

Because it is revenue only if over $1,000

Because it was earned legally and therefore must be included in revenue

Because the SEC requires it

Because interest is profit generated by providing a loan and is income to the lender

Answer & Explanation

Correct Answer: Because interest is profit generated by providing a loan and is income to the lender

Note: This Question is unanswered, help us to find answer for this one

When do lenders require Private Mortgage Insurance (PMI)?

When the loan to value ratio is greater than 80%

When the buyer makes under $40,000 a year

When the buyer has unfavorable credit

When the buyer is a millionaire

Answer & Explanation

Correct Answer: When the loan to value ratio is greater than 80%

Note: This Question is unanswered, help us to find answer for this one

What are low interest loans offered by schools to the neediest students called?

Fair Market Loans

Trustee Loans

Perkins Loans

Beneficiary Loans

Answer & Explanation

Correct Answer: Perkins Loans

Note: This Question is unanswered, help us to find answer for this one

What would happen to the balance sheet of a company that has automobiles with loans associated with them, and sells the automobiles for more than the carrying value of the loan?

There will be no impact

The company would be out of compliance with loan covenants

There will be gain on the sale of automobiles, and a reduction in debt

There will be loss on the sale of automobiles, and an increase in debt

Answer & Explanation

Correct Answer: There will be gain on the sale of automobiles, and a reduction in debt

Note: This Question is unanswered, help us to find answer for this one

How is interest on a loan shown on the financial statements?

As a long term liability

As a short term liability

As revenue

As an expense incurred during the period

Answer & Explanation

Correct Answer: As an expense incurred during the period

Note: This Question is unanswered, help us to find answer for this one

How much is one point worth?

10 percent of the mortgage

0.1 percent of the mortgage

1 percent of the mortgage

$1000

Answer & Explanation

Correct Answer: 1 percent of the mortgage

Note: This Question is unanswered, help us to find answer for this one

What does the term "Flipping" denote?

A fee charged for the use of money

Buying expensive properties and renting them out

Buying undervalued properties and renting them out

The process of buying a property and then attempting to sell it relatively quickly for a profit

Answer & Explanation

Correct Answer: The process of buying a property and then attempting to sell it relatively quickly for a profit

Note: This Question is unanswered, help us to find answer for this one

What is meant by Predatory Lending?

Lending money to people who are extended beyond their means in an attempt to get them to spend more than they should

Lending money to high net worth individuals

Lending people money to buy a car

Lending money to students to pay for their education

Answer & Explanation

Correct Answer: Lending money to people who are extended beyond their means in an attempt to get them to spend more than they should

Note: This Question is unanswered, help us to find answer for this one

What is meant by Subprime Lending?

Mortgages aimed at the poor/uneducated people at higher interest rates

Mortgages aimed at the rich and wealthy

Mortgages offered at the fair market rate

Mortgages geared towards people with jobs

Answer & Explanation

Correct Answer: Mortgages aimed at the poor/uneducated people at higher interest rates

Note: This Question is unanswered, help us to find answer for this one

What is meant by the term "Recoverable Grants"?

Funds provided by a philanthropist to fulfill a role similar to equity

Interim financing for a home buyer

A short term loan used to pay closing costs

A bond that does not earn any interest

Answer & Explanation

Correct Answer: Funds provided by a philanthropist to fulfill a role similar to equity

Note: This Question is unanswered, help us to find answer for this one

Loans & Lending Practices Quick Quiz

Poor Results!

You need a lot of improvement.

Just don't give up!

Correct Answers: 0/10

Start Practicing with our MCQs given below.