Mr Ojo borrowed N54,000 from a Commercial bank and deposited his life assurance certificate with the bank. The certificate deposited serves as?

Assessment: WAEC SSCE - Commerce - 1995 (Objective) Subject: Commerce

Question 1 Report

Mr Ojo borrowed N54,000 from a Commercial bank and deposited his life assurance certificate with the bank. The certificate deposited serves as?
Answer Details
The certificate deposited by Mr Ojo with the commercial bank serves as collateral. Collateral is an asset that is pledged by a borrower to a lender as security for a loan or debt. It acts as a guarantee to the lender that the borrower will repay the loan, and if the borrower fails to repay, the lender can seize and sell the collateral to recover the outstanding loan amount. In this case, Mr Ojo has deposited his life assurance certificate with the bank to secure the loan of N54,000.
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