Question

Which of the following are the three basic ways of lending unsecured, short-term funds by commercial banks?

a. mortgage-backed securities, T-bonds, and commercial paper
b. single-payment note, lines of credit, and revolving credit agreements
c. commercial paper, real estate bonds, and corporate bonds
d. T-bills, municipal bonds, and commercial paper

Answer 1

The correct answer is option b. The three basic ways of lending unsecured, short-term funds by commercial banks are single-payment notes, lines of credit, and revolving credit agreements.

Step-by-step explanation:

The three basic ways of lending unsecured, short-term funds by commercial banks are:

1. Single-payment note: This is a type of loan where the borrower receives a lump sum payment and is required to repay the loan in full by a specified maturity date.
2. Lines of credit: This is a type of loan that provides the borrower with access to a pre-approved amount of funds that can be borrowed as needed. The borrower only pays interest on the amount borrowed.
3. Revolving credit agreements: This is a type of loan that allows the borrower to borrow, repay, and borrow again up to a pre-approved credit limit. The borrower pays interest on the outstanding balance.

Therefore, the correct option is b. single-payment note, lines of credit, and revolving credit agreements.