INSTITUTE OF BANKERS CERTIFICATE IN BANKING, FINANCE AND CREDIT INTRODUCTION TO CREDIT AND CONSUMER LENDING ASSIGNMENT 2

Transcription

1 INSTITUTE OF BANKERS COURSE: MODULE: CERTIFICATE IN BANKING, FINANCE AND CREDIT INTRODUCTION TO CREDIT AND CONSUMER LENDING ASSIGNMENT 2 MODULE CODE: CCL 100 TOTAL MARKS: 100 EXAMINER: Ms. BRIGITTE FIKUNAWA INSTRUCTIONS: ANSWER ALL 8 (EIGHT) QUESTIONS. START EACH QUESTION ON A NEW PAGE. WRITE NEATLY AND CLEARLY

2 Dear Student Welcome to the Institute of Bankers. We hope that you will find the academic year both interesting and rewarding, and that you will be successful. We advise you to get all the relevant information and booklets available for you from your IOB centre. After having read this tutorial letter, you should read the study guide to get an overall impression of the nature and scope of the course you are registered for. Once you have done this, you must compile a study programme for the semester. Determine the dates for the submission of assignments; decide how much time you should allow for each course and how you are going to divide your time between working on assignments, reading recommended books, and studying the study guide. If you do not do this, you might not be able to get through your work or will be less successful than if you had planned your work. Study the contents of the tutorial letter and the study guide(s) before you consult the prescribed and recommended text book(s). If it becomes necessary to explain or to amend some study material, it will be done through tutorial letters. Please note that tutorial letters form part of your study material. Above all, we would like you to succeed to get as much as possible out of your studies and pass the assignments as well as examinations. Study materials Your study booklet is essentially your lecturer and your guider. Visit the library and consult prescribed textbooks and recommended readings that are indicated in your study booklet to enrich yourself. You are advised to follow the guidelines in the Students Study Guide. Submission of assignments It is very important to complete and submit a clean, clear and well-argued assignment for marking. Make sure that you understand the question before answering and answer all the questions. Every page of the completed assignment must be numbered in the correct order. You should complete and submit all assignments on or before the given due date. Note: Plagiarism will not be entertained.

3 Note that assignments received after due date will not be accepted and therefore will not be included in the calculation of continuous assessment (CA) marks. The CA mark and the examination mark will determine your final mark for the module. Vacation schools Attending group discussions during vacation school is COMPULSORY and you are strongly advised to attend such discussions whenever possible. The vacation school timetable will be made available to you. Closing remarks If you study conscientiously, your effort will be rewarded. Should you need any assistance or clarification on the module contents, you can reach the tutors at the given contact details. Tutor Ms. Brigitte Fikunawa NOTE: For additional information consult the IOB General Information and Regulations Prospectus. Please note: Two assignments will be submitted during the first semester. ASSESSMENTS You have to submit TWO assignments. Both contribute equally towards you continuous assessments mark. EXAMINATION To qualify for the examination, you must obtain a CA mark of 50%, which means an average of 50% from your two assignments. All papers are set on your study material and course work. The examination consists of 1 paper of 3 hours.

4 ASSIGNMENTS FOR 2018 The assignments for 2018 have been set to reflect what is in the module for your course. It must be emphasized that general principles have been stressed and could be challenging sometimes, so as to obtain the best for you. Consequently, it has been prepared to achieve the following: 1. Assess your progress in the course 2. Provide opportunity to discuss your work and obtain feedback 3. Make amends 4. Provide dialogue between Tutor and student. BEST WISHES!!!

5 ASSIGNMENT 1: 100 Marks Question 1 (15 Marks) 1. Which of the following statement is wrong; the ways to improve your credit rating? a. Look at credit card debt and eliminate it if it s possible b. Have more credit cards and incur less balance on each c. Cut down on the number of open credit card accounts d. Pay off credits at each payment cycle Is defined as a loan that no longer gives return on principal and interest payments, where the financial institution no longer make money from the loan. a. Bad loan b. Performing loan c. Problem loan d. Unsecured loan 3. Zombie Debts occurs because of the following except a. When people fail to repay their loans b. When people fall victims of fraud c. The bank charges high interest rate d. Debt collector charges the third party 4. The system used by creditor to calculate the probability of the loan repayment is called a. Credit profile b. Credit history c. Credit scoring d. Line of credit 5. Borrowers seek to pay their debts that are outstanding. These types of debts are called and they are calculated into a ratio that the lenders use to assess/calculate risk. The ratio is known as a. Liabilities b. Assets c. Debt-to-income ratio d. Debt ratio 6. When it comes to credit, the lender uses the following Cs to assess the credit application, expect a. Character b. Collateral and Guarantee c. Cash flow d. Capability to manage the business

6 7. Complete the missing word. A contra-asset accounts that record the portion of a company's receivables, which it expects may not be collected is only an estimate of the amount of accounts receivable which are expected to not be paid. a. allowance for doubtful accounts b. Charge offs c. Bad debt reserve d. Unsecured debt 8. If your monthly income is N$ and you pay N$ 4000 and N$2500 per month in debt payment for mortgage and credit cards. What is your debt to income ratio a. 0.3 b c d is a preapproved loan between a financial institution and borrower that may be used repeatedly up to a certain limit and can subsequently be paid back prior to payments coming due. a. Open-end credit b. Secured credit c. Closed-ended credit d. Problem loan 10. is any institution or individual who loans borrower money a. Lender b. Borrower c. Investor d. Customer 11. A lender of last resort is a type of lender which focuses on protecting a country s national economy from collapse. A lender of last resort in Namibia is called? a. Bank of Namibia b. Development Bank of Namibia c. NAMFISA d. FNB of Namibia 12. An assessment that shows the likelihood that a borrower will default on their debt obligations is called? a. Credit worthiness b. Credit limit c. Credit facility d. Credit netting 13. The amount charged, expressed as a percentage of the principal amount, by a lender to a borrower for the use of assets is called?

7 a. Interest rate b. Bank rate c. Deposit rate d. Finance charge 14. Is the maximum amount that a creditor is willing to extend or to allow a debtor to borrow? a. Credit limit b. B. Credit protection c. Loan d. Credit Question 2 Debt to income ratio provides a snapshot of what must be earned in order to pay monthly obligation. State and explain the two distinctive forms of debt to income ratio. (6 Marks) Question 3 Financial institutions review certain aspects in regards to extending credit to borrowers. State and explain the 6 aspects that they look at before extending credit. (18 Marks) Question 4 With the help of the information below, calculate Tim s debt to income ratio and comment on the answer. (6 Marks) Monthly income N$ Expenses Rent N$ Study loan N$ Car loan N$ Question 5 With your own words define credit and Explain why the supply of credit is vital for the growth and development of the economy? (20 Marks) Question 6 Loans are classified in different forms. Outline and explain the different loans classifications. (12 Marks)

8 Question 7 State and explain six factors to consider when assessing the creditworthiness of an individual or business? (12 Marks) Question 8 Compare and contrast business credit and commercial credit (10 Marks)