Economics: Money and Credit · Class 10 · CBSE Social Science
What is collateral in the context of borrowing?
Practice question from Economics: Money and Credit (Class 10 · CBSE Social Science), with the correct answer and a step-by-step solution.
easy · MCQ · Q-18A1FB
What is collateral in the context of borrowing?
- A.An agreement to repay the loan within a fixed time.
- B.An asset that the borrower owns and uses as a guarantee to a lender until the loan is repaid.Correct answer
- C.The interest rate charged by the informal sector.
- D.A document proving employment status.
Solution
Collateral is an asset such as land, building, vehicle, livestock, or deposits with banks that the borrower owns and uses as a guarantee to a lender until the loan is repaid.
More from Economics: Money and Credit
- Why is money accepted as a medium of exchange?
- What does the double coincidence of wants mean?
- What is the main source of income for commercial banks?
- Which of the following institutions is responsible for supervising the functioning of formal sources of loans in India?
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