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Single Answer MCQ
Q-00045419

In banking, what does 'collateral' refer to?

1

The interest rate charged on the loan

2

An asset pledged by a borrower to secure a loan

3

The cash reserves a bank holds

4

The fees charged for maintaining an account

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Sandeep Chaturvedi

Sandeep Chaturvedi

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Social science and humanities educator with 14+ years of experience reviewing CBSE SST, economics, commerce, arts, and vocational content.

M.A. HistoryM.A. Political ScienceB.Ed.

Answer and Solution

Answer

B. An asset pledged by a borrower to secure a loan

Solution:

Collateral refers to an asset that a borrower offers as security to a lender to secure a loan, ensuring that the lender can recover losses in case of default.

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