Final answer:
A credit memorandum example includes the bank's collection of a note receivable. Ways to reassure a bank about a borrower's repayment include providing income proof, conducting a credit check, proposing a cosigner, or offering collateral. Components of M1 are traveler's checks, physical currency, checking accounts, and M2 includes money market accounts.
Step-by-step explanation:
An example of a credit memorandum is the collection of a note receivable by the bank. A credit memorandum is a document issued by a financial institution that acknowledges the addition of credit to a depositor's account. This can happen when a bank collects the amount owed on a note receivable. Essentially, it represents an amount that the bank collects on behalf of the account holder, increasing their account balance accordingly.
When it comes to someone looking for a loan, there are several ways to reassure a bank given imperfect information about the borrower's capability to repay the loan. The potential borrower can provide proof of income, undergo a thorough credit check, propose a cosigner for the loan, or offer collateral like property or equipment that the bank can seize if the loan isn't repaid.
Here's the categorization of different items into M1 or M2:
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- a. Your $5,000 line of credit on your Bank of America card - Neither (this is a credit line, not money).
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- b. $50 dollars' worth of traveler's checks you have not used yet - M1 (traveler's checks are included in M1).
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- c. $1 in quarters in your pocket - M1 (this is physical currency).
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- d. $1200 in your checking account - M1 (checking accounts are included in M1).
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- e. $2000 you have in a money market account - M2 (money market accounts are included in M2, but not in M1).