ARELLANO UNIVERSITY

Gov. Pascual Avenue, Malabon City

Final Examination
Banking and Financial Institutions
March 21, 2020

1. Why is credit a very important component of our economy?

2. What is credit? How it may be distinguished from debt?

3. What types of loans are granted by bank?

4. Why is agricultural credit a serious concern of the government?

5. What bases are usually used in evaluating a credit risk?

6. Read each of the following statements and then explain why you agree or
disagree.
a. “A bank card is nice to have. If I’m out of cash, I can still buy what I want.”
b. “I don’t believe in using credit for most purchases. I pay cash for everyday
items and use credit only for expensive items such as a new refrigerator.”
c. “If I can’t pay cash, I can’t afford it. I won’t buy anything unless I can pay
cash.”
d. “I often don’t pay the full amount of my charge account when it is due; the
finance charges are quite reasonable.”

7. Many businesses would rather take credit cards than accept personal checks.
Why do you think business people feel this way?

8. Dave Juance owns a sporting goods store and is considering joining a bank
charge-card plan. Answer the following questions for his.

a. What advantages would there be for his business if he did join?

b. What will it cost his for the services the bank will provide?
c. In what ways are the services the bank provides important?

1
9. Ronald Sibayan has a good part-time job and is a responsible person. Ronald
Sibayan wants to buy a motorcycle, but has not saved enough money to cover
the cost. When he asked the salesperson if the store would extend credit, Ronald
was told, “No, you are too young.” Ronald is 16 years old. What are some ways
in which Ronald could get credit to purchase this motorcycle?

10. Lester N. Milado got himself into credit difficulty. He tended to spend foolishly
and use his credit cards too often. Then he missed payments when they were
due. He had five accounts with overdue payments. Lester needed a loan to pay
off his charge accounts. The Miguel Isaiah Capistrano-Along Finance Company
agreed to give him a loan if he could get a consigner. When he asked his good
friend, Melencio M. Orio Jr. to be a consigner, he said “no problem.” He had an
excellent credit record and Lester Milado got a Php100,000.00 loan at 15 percent
interest.

Month after by Melencio M. Orio Jr. did not even think about the loan nor did he
see Lester Milado. Then the letter came: Lester Milado had failed to make his
last five payments, and he had left town with no forwarding address. The letter
demanded that Melencio Orio make up the back payments immediately and pay
the balance due. He knew that as a consigner he was responsible for this debt;
he did not want a negative report to be part of her credit record.
a. What mistake dis Melencio Orio make in consigning this loan?
b. What might she have done originally to help his friend Lester Milado?