Finastra Assessment Test Finastra Assessment Corporate and Retail Lending 3

Question 1

What is the purpose of a 'debt service coverage ratio' (DSCR) in commercial lending?

Accepted Answer

To assess whether a borrower's cash flow covers loan payment obligations

Answer

DSCR compares a borrower's net operating income to its debt obligations, indicating whether cash flow is sufficient to service the debt.

Question 2

What replaced LIBOR as the primary benchmark rate for US dollar loans following the LIBOR transition?

Accepted Answer

SOFR (Secured Overnight Financing Rate)

Answer

SOFR, based on overnight US Treasury repurchase agreements, replaced USD LIBOR as the standard benchmark rate after the LIBOR phase-out.

Question 3

In Finastra's Fusion Loan IQ, what is the function of a 'facility' within a deal structure?

Accepted Answer

A specific credit line or tranche within an overall credit agreement

Answer

In Fusion Loan IQ, a facility represents a specific credit tranche or sub-agreement within a broader deal, each with its own terms and conditions.

Question 4

What is 'adverse selection' risk in retail lending?

Accepted Answer

The tendency for higher-risk borrowers to be more likely to seek credit

Answer

Adverse selection occurs because borrowers with the greatest need for credit (often higher-risk) are more likely to apply, skewing the lender's portfolio toward riskier loans.

Question 5

Which type of corporate loan structure allows borrowers to access funds in multiple currencies?

Accepted Answer

Multicurrency revolving credit facility

Answer

A multicurrency revolving credit facility lets borrowers draw down funds in different currencies, accommodating multinational operational needs.

Finastra Assessment Test Practice Test

Finastra Assessment Test Practice Test

Finastra Assessment Test Finastra Assessment Corporate and Retail Lending 3