Certified Financial Management Specialist Practice Exam

What do borrowers receive when they take out a loan from a bank?

1. Interest

2. Grants

3. Money

4. Deposits

The correct answer is: Money

When borrowers take out a loan from a bank, they receive money, which is the principal amount of the loan. This sum is provided to them for various purposes, such as purchasing a home, financing a vehicle, or funding a business venture, among other needs. The bank essentially provides these funds upfront, and in return, the borrower agrees to repay the loan over time, usually with interest. The interest is the cost of borrowing the money and is paid back over the life of the loan alongside the principal amount. The other options do not accurately describe what borrowers receive. Interest is a payment made by borrowers to the lender and is calculated on the amount borrowed; it is not received upfront. Grants typically do not require repayment and are often provided for specific purposes, such as education or research, so they are not applicable in the context of loans. Deposits refer to funds placed into a bank account, which is the opposite of what occurs when someone takes out a loan, meaning that deposits do not represent the act of borrowing. Hence, the correct response is that borrowers receive money when they take out a loan from a bank.