You are a depositor giving cash at the start, therefore you are lending to the bank. The bank is borrowing from you.
You are a depositor giving cash at the start, therefore you are buying debt from the bank. The bank has sold their debt to you. You've bought the bank's promise to pay you back, which is a contract on a piece of paper.
You are a depositor giving cash at the start, therefore you are investing in the debt asset issued by the bank. In return for you investment, the bank issued you the piece of paper debt contract promising to pay you back the principal plus interest.
The deposit account at the bank is your debt asset since it will give you a future benefit. On the other side of the coin, the deposit account is the bank's debt liability since they owe it to you.
Borrowers owe money to their lenders.
Lenders are owed money by their borrowers who owe them. Strangely, 'owed' is not the past tense of 'owe'. They have completely opposite meanings which doesn't make sense.
Owners of debt assets must be lenders since they are owed money, they expect a positive benefit in the future when they're paid back.
You received cash from the bank at the start using the home loan, therefore you sold the home loan debt.
You received cash at the start using the home loan and in return you issued the piece of paper debt contract promising to pay back the principal plus interest to the bank.
Which of the following statements is NOT correct? Borrowers:
Borrowers sell debt. This is because borrowers receive cash at the start for selling the debt contract to the lender. Note that selling debt can also be called being 'shorting' debt.
Which of the following statements is NOT correct? Lenders:
Lenders are owed money by borrowers. Confusingly, lenders' debt is actually an asset, not a liability. Lenders own the asset class debt.
Which of the following statements is NOT correct? Bond investors:
A bond investor buys bonds, which is lending. But a debtor sells bonds, which is borrowing.
Which of the following statements is NOT correct? Lenders:
Writing debt is selling debt or borrowing, not lending. The borrower writes the contract promising to pay the lender back the principal and interest and then sells it to the lender.
You deposit money into a bank. Which of the following statements is NOT correct? You:
When you deposit money at the bank, you have not issued debt, the bank has issued the debt contract to you. You have invested in the bank's debt.
The bank would have given you a piece of paper receipt when you deposited the money. This is a sort of debt contract that the bank issued to you in which they promise to pay you interest and eventually the principal when you choose to withdraw the cash.
You bought a house, primarily funded using a home loan from a bank. Which of the following statements is NOT correct?
The home loan is a debt asset to the bank since they're the lender. The home loan is a debt liability to you since you're the borrower.
Question 771 debt terminology, interest expense, interest tax shield, credit risk, no explanation
You deposit money into a bank account. Which of the following statements about this deposit is NOT correct?
No explanation provided.