First National Bank would like to make a loan to an affiliate bank. Which of the following would NOT be acceptable as collateral for such a loan?
Click on the arrows to vote for the correct answer
A. B. C. D.C
The question is asking which of the following collateral types would NOT be acceptable for a loan from First National Bank to an affiliate bank. Let's go through each answer choice and determine whether it would be an acceptable form of collateral:
A. U.S. Treasury bills in an amount equal to the loan: This would likely be acceptable collateral, as U.S. Treasury bills are considered very safe investments and are generally accepted as collateral by banks.
B. Stock traded on the New York Stock Exchange that has a market value equal to 130 percent of the loan amount: This could also be acceptable collateral, as long as the stock meets certain criteria (such as being publicly traded and having a liquid market). However, it's important to note that the value of stocks can be volatile and may decline, so banks may be hesitant to accept them as collateral unless they have a high margin of safety (in this case, 130 percent of the loan amount).
C. An account for the benefit of First National held at the affiliate bank in an amount equal to the loan amount: This would likely be acceptable collateral, as long as the account is in good standing and the affiliate bank is able to pledge the funds as collateral.
D. Eligible bankers' acceptances with a market value equal to the loan amount: This would also likely be acceptable collateral, as long as the bankers' acceptances meet certain eligibility criteria (such as being issued by a reputable bank and having a maturity date within a certain timeframe).
Therefore, the answer to the question is none of the above - all of the options listed could potentially be acceptable forms of collateral for a loan from First National Bank to an affiliate bank.