What is the primary purpose of collateral in a loan agreement?

Understanding Collateralized Loans and Repo Agreements

Interactive Video
•
Business, Social Studies
•
10th Grade - University
•
Hard

Emma Peterson
FREE Resource
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10 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
To extend the loan repayment period
To reduce the interest rate
To secure the loan by providing an asset
To increase the loan amount
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
In a pawn transaction, what happens if the borrower fails to repay the loan?
The lender returns the collateral
The borrower receives a penalty
The lender keeps the collateral
The borrower gets an extension
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
How does a repurchase agreement differ from a traditional collateralized loan?
The loan amount is higher
The borrower pays no interest
The repayment period is longer
The lender has ownership of the collateral
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is a 'repo' in financial terms?
A type of savings account
A stock market transaction
A loan without collateral
A repurchase agreement
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Why might a lender prefer a repurchase agreement over a traditional loan?
To avoid interest payments
To increase the loan amount
To reduce paperwork
To ensure ownership of the collateral
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
In a repo transaction, what does the borrower agree to do in the future?
Reduce the interest rate
Increase the loan amount
Repurchase the collateral from the lender
Sell the collateral to another party
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is the main advantage of a repurchase agreement for the lender?
Higher interest rates
Ownership of the collateral
Longer repayment terms
No risk involved
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