Chapter 6

Question 1

sources of capital

Answer 1

personal savings
gifts
grants
inheritance
profits
windfall income (lottery)
sale of fixed assets
credit

Question 2

it represents the capacity or the ability of the farmer to borrow money for use in the farm business

Answer 2

credit

Question 3

sources of credit

Answer 3

priv indivs
institutional lenders

Question 4

types and classification of loans

Answer 4

based on repayment period
based on use
based on security payment
based on repayment plan

Question 5

type of loan based on repayment period

Answer 5

short-term
medium-term
long-term

Question 6

loan used to purchase inputs needed sa current prod cycle

Answer 6

short-term loans

Question 7

loan na may repayment period of more than one year, pero less than 10 yrs

Answer 7

medium-term or intermediate-term loans

Question 8

loan used to purchase land, buildings, and assets with loooong life

Answer 8

long-term

Question 9

loan that have a repayment period of more than 10 years

Answer 9

long-term

Question 10

loan used to purchase machinery, animal stock

Answer 10

medium-term or intermediate-term

Question 11

loan where payment is usually due when harvest is sold
(90 to 360 days)

Answer 11

short-term

also called production loans

Question 12

types of loans based on use

Answer 12

commodity and activity

Question 13

examples are crop loan and livestock loan

Answer 13

commodity loan

Question 14

example of activity loans

Answer 14

prod loan, marketing loan, product processing loan

Question 15

types of loan based on security requirement

Answer 15

secured and unsecured/character/signature

Question 16

assets pledged to the lender to ensure the loan is repaid

Answer 16

loan security

Question 17

loans which require collateral

Answer 17

secured loands

Question 18

loans without collateral requirement

Answer 18

unsecured/character/signature loan

Question 19

loan requires a ‘promise-to-pay’ note

Answer 19

unsecured/character/signature loan

Question 20

types of loan based on repayment plan

Answer 20

-single payment
-ammortized loan

Question 21

loan where principal and interest are paid in lump sum

Answer 21

single payment loan

Question 22

loan that requires periodic payment of principal and interest (installment basis)

Answer 22

amortized loan

Question 23

amount paid for the use of capital

Answer 23

interest

Question 24

amount of capital originally invested in a business transaction

Answer 24

principal

Question 25

amount received for money invested

Answer 25

interest

Question 26

interest payment formula

Answer 26

IP = Prt

Question 27

cost of demanding or borrowing loanable funds

Answer 27

interest rate

Question 28

rate of return from supplying or lending loanable funds

Answer 28

interest rate

Question 29

sum of principal ad interest due at any time after investment of principal

Answer 29

full amount/total payment

Question 30

2 methods of paying amortized loan

Answer 30

- equal annual amortization/ equal total payments - equal principal payment

Question 31

process of computing equal annual amortization/ equal total payments

Answer 31

total payment muna loan amount x CRF interest payment balance/loan amount x interest rate principal total payment - interest payment

Question 32

process of computing equal principal payment

Answer 32

annual principal loan amount/loan payment period interest payment balance x interest rate total payment principal payment + interest payment