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Question (11)

QN0038131

Salim borrows money to buy raw materials and hire workers for fulfilling a confirmed shoe order. If the order is completed successfully and generates profit, what role has credit played?

(A) It has created a debt trap
(B) It has reduced production
(C) It has helped increase earnings
(D) It has eliminated the need for repayment

Correct Answer: C

Explanation:

Salim's case shows how credit can support working capital, production and earnings.

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Question (12)

QN0038132

A farmer borrows ₹50,000 for cultivation. Due to crop failure, the farmer earns only ₹30,000 and cannot repay the loan. The next year another loan is taken to continue cultivation. What is the major risk?

(A) Double coincidence
(B) Debt trap
(C) Demand deposit
(D) Formalisation

Correct Answer: B

Explanation:

If new borrowing is needed to repay old debt and the debt keeps increasing, the borrower may enter a debt trap.

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Question (13)

QN0038133

A borrower has two loan options: Bank: 8% annual interest; Moneylender: 4% monthly interest. On a principal of ₹1,00,000, assuming simple comparison over one year, how much more interest would the moneylender charge?

(A) ₹8,000
(B) ₹24,000
(C) ₹40,000
(D) ₹48,000

Correct Answer: C

Explanation:

Moneylender's annual rate = 4% × 12 = 48%. Difference from bank rate = 48% − 8% = 40%. On ₹1,00,000, the difference is ₹40,000.

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Question (14)

QN0038134

Which combination correctly represents the terms of credit?

(A) Income, occupation, age and location
(B) Interest rate, collateral, documentation and mode of repayment
(C) Deposit, currency, cheque and ATM
(D) Production, consumption, saving and investment

Correct Answer: B

Explanation:

Interest rate, collateral, documentation and mode of repayment together constitute the terms of credit.

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Question (15)

QN0038135

Megha takes a ₹5 lakh house loan at 12% annual interest. Ignoring compounding and repayment structure, what would the simple annual interest be?

(A) ₹6,000
(B) ₹60,000
(C) ₹1,20,000
(D) ₹5,60,000

Correct Answer: B

Explanation:

12% of ₹5,00,000 = ₹60,000.

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Question (16)

QN0038136

If a borrower wants the easiest possible terms of credit, which combination is generally preferable?

(A) High interest, difficult repayment and more collateral
(B) Low interest, easy repayment and less collateral
(C) High interest, easy repayment and more collateral
(D) Low interest, difficult repayment and more collateral

Correct Answer: B

Explanation:

Easy terms mean low interest, easy repayment conditions and less collateral or documentation.

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Question (17)

QN0038137

A borrower takes a ₹2,00,000 loan at 10% annual simple interest for one year. What amount will be payable including interest?

(A) ₹2,10,000
(B) ₹2,20,000
(C) ₹2,00,010
(D) ₹2,10,200

Correct Answer: B

Explanation:

Interest = 10% of ₹2,00,000 = ₹20,000. Total = ₹2,20,000.

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Question (18)

QN0038138

A borrower owns land worth ₹8 lakh and uses its ownership papers as security for a loan. What is the land functioning as?

(A) Demand deposit
(B) Collateral
(C) Currency
(D) Medium of exchange

Correct Answer: B

Explanation:

Collateral is an asset pledged as a guarantee until the loan is repaid.

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Question (19)

QN0038139

A small farmer needs ₹80,000 for cultivation but does not possess assets that can be offered as collateral. Which factor may make a bank reluctant to lend?

(A) The farmer uses money
(B) Lack of collateral
(C) The farmer needs seeds
(D) The farmer plans to sell crops

Correct Answer: B

Explanation:

Lack of collateral is a major reason poor borrowers may not obtain bank loans.

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Question (20)

QN0038140

Shyamal borrowed at 5% per month earlier and later at 3% per month. What was the reduction in the monthly interest rate?

(A) 1 percentage point
(B) 2 percentage points
(C) 3 percentage points
(D) 5 percentage points

Correct Answer: B

Explanation:

5% − 3% = 2 percentage points.

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Question (11)

Salim borrows money to buy raw materials and hire workers for fulfilling a confirmed shoe order. If the order is completed successfully and generates profit, what role has credit played?

Explanation:

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Question (12)

A farmer borrows ₹50,000 for cultivation. Due to crop failure, the farmer earns only ₹30,000 and cannot repay the loan. The next year another loan is taken to continue cultivation. What is the major risk?

Explanation:

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Question (13)

A borrower has two loan options: Bank: 8% annual interest; Moneylender: 4% monthly interest. On a principal of ₹1,00,000, assuming simple comparison over one year, how much more interest would the moneylender charge?

Explanation:

Link:

Question (14)

Which combination correctly represents the terms of credit?

Explanation:

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Question (15)

Megha takes a ₹5 lakh house loan at 12% annual interest. Ignoring compounding and repayment structure, what would the simple annual interest be?

Explanation:

Link:

Question (16)

If a borrower wants the easiest possible terms of credit, which combination is generally preferable?

Explanation:

Link:

Question (17)

A borrower takes a ₹2,00,000 loan at 10% annual simple interest for one year. What amount will be payable including interest?

Explanation:

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Question (18)

A borrower owns land worth ₹8 lakh and uses its ownership papers as security for a loan. What is the land functioning as?

Explanation:

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Question (19)

A small farmer needs ₹80,000 for cultivation but does not possess assets that can be offered as collateral. Which factor may make a bank reluctant to lend?

Explanation:

Link:

Question (20)

Shyamal borrowed at 5% per month earlier and later at 3% per month. What was the reduction in the monthly interest rate?

Explanation:

Link:

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