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Which of the following forms may not result in credit risk? (A) Principle and/or interest amount may not be repaid in the case of direct lending. (B) In case of guarantees or letter of credit, fund may not be forth coming from the constituents upon crystallisation of the liability. (C) Funds/Securities settlement may not be effected, in case of securities trading business. (D) Provide information for determining adequacy of loan loss provision. Choose the correct answer from the options given below:

Which of the following forms may not result in credit risk? (A) Principle and/or interest amount may not be repaid in the case of direct lending. (B) In case of guarantees or letter of credit, fund may not be forth coming from the constituents upon crystallisation of the liability. (C) Funds/Securities settlement may not be effected, in case of securities trading business. (D) Provide information for determining adequacy of loan loss provision. Choose the correct answer from the options given below: Correct Answer D only

The correct answer is D only

Provide information for determining adequacy of loan loss provision will not result in credit risk.

Key Points Credit Risk:

  • The risk of losing money due to a borrower's failure to repay a loan is known as credit risk.
  • It refers to a lender's risk of having its cash flows disrupted if a borrower fails to pay principal or interest on a loan.
  • When a borrower does not have enough cash flow to pay a creditor or does not have enough assets to sell to make a payment, credit risk is deemed to be higher.
  • The lender is more likely to demand compensation in the form of a higher interest rate if the risk of non-payment is greater.

Related Questions

Choose the correct code for the following statements being correct or incorrect. Statement I : When the two securities returns are perfectly positively correlated, the risk of their portfolio is just a weighted average of the individual risks of the securities. In such case, diversification does not provide risk reduction but only risk averaging. Statement II : Total risk of a portfolio of two risk securities can be completely eliminated when their returns are perfectly negatively correlated and their proportionate holdings in the portfolio are inversely related to the relative individual risks of the securities. 
Given below are three quantities named 1, 2 and 3. Based on the given information, you have to determine the relationship between the three quantities. You should use the given data and knowledge of Mathematics to choose between the possible answer. Quantity 1: An automobile financier claims to be lending money at simple interest, but he includes the interest every six months for calculating the principal. If he is charging an interest of 10%, the effective rate of interest becomes. Quantity 2: A sum of Rs. 725 is lent at the beginning of a year at a certain rate of interest. After 8 months, a sum of Rs. 362.50 more is lent but at the rate twice the former. At the end of the year, Rs. 33.50 is earned as interest from both the loans. What was the original rate of interest? Quantity 3: The difference between the compound interest and the simple interest on an amount of 15000 for 2 years is Rs. 96. What is the rate of interest per annum?
Match List I with List II: List I List II (A) Market risk (I) Associated with the efficiency with which a firm conducts its operations within the broader environment imposed upon it. (B) Financial risk (II) Arises due to change in operating conditions caused by conditions thrust upon the firm which are beyond its control. (C) External business risk (III) Variations in price sparked off due to real, social, political and economic events. (D) Internal business risk (IV) Associated with the capital structure of a firm. Choose the correct answer from the options given below:
Under which pillar of RBI's new capital adequacy framework (Basel-II guidelines), minimum 8% capital adequacy for credit risk, market risk and operational risk has been prescribed?
Priya and khushi invested Rs.3000 together. Priya invested her amount at compound interest for ‘x/10’ years at x% rate interest and khushi invested half of her amount at compound interest and remaining half at simple interest at the same rate of interest for the same time period. [It is given that ‘x/10’ is a natural number] What is the value of ‘x’? Statement I: Ratio of investment of priya and khushi is 1 : 2 respectively and total sum received by them together after a particular time at x% rate of interest is Rs. 4280. Statement II: Simple interest received by khushi is Rs. 40 less than compound interest received by her. Statement III: Sum of simple interest and compound interest received by khushi after a certain time at x% rate of interest is Rs. 2500 Which of the above statement is redundant to find the answer of the given question?
Meena took a loan of Rs 8000 at 20 percent per annum compound interest compounded semi annually. She repaid the loan after two years. Had she repaid the loan after a year, how much money she could have saved?
Which of the following losses are NOT deductible from business Income? A. Loss incurred in closing down the business B. Loss incurred due to damage destruction etc. of capital assets C. Loss of stock-in-trade due to enemy action D. Loss sustained before the business is commenced E. Loss of raw material finished good-in-transit Choose the correct answer from the options given below:
Which of the following statements is/are correct with regard to 'absolute liability' principle laid down in M. C. Mehta v. Union of India. Answer by using the below:
(1) The principle was approved except as to quantum of damages in Charan Lal Sahu v. Union of India
(2) The principle in determining compensation was applied in Union Carbide Corporation v. Union of India
(3) The compensation to be awarded must have some broad correlation not only with magnitude and capacity of the enterprise but also with the harm caused by it was held in Deepak Nitrite v. State of Gujarat
(4) The principle is not followed in India because Parliament could not yet pass Public Liability Insurance Bill, 1991
Propositions as regards the liability of the surety under the surety bond are:
1. The liability of the surety is mutually exclusive of the liability of the accused under his personal bond.
2. The liability of the surety is contingent on the liability of the accused under his personal bond the liability of the surety.
3. is limited to the amount of the surety bond.
Now which of the following is correct
Marshall lent certain amount of money at 10% p.a. simple interest. After a year, Rs. 5500 is repaid and the rest of the amount is repaid at 20% p.a.. If the second year's interest is 11/9 of the 1st year's interest, find how much amount of money lent out initially ?