The principal and interest What is the true definition of Compound interest? Main part amount you are borrowing

Commercial letter of credit

What does a Standby letter of credit guarantee?

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  A standby letter of credit guarantees - payments on a security. A company might buy a standby letter when it issues commercial paper. The bank that provides the letter agrees to pay off the paper if the company defaults. As a result of this guarantee, the commercial paper gets higher grades from bond-rating agencies. Higher ratings reduce the interest rate that the company must pay on the paper.
  

Off-balance sheet activities also include Asset Management. Why is it recorded as off-balance sheet activity?

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  In addition to holding their own assets, banks manage assets for others.
  
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  A small pension fund, for example, might want to buy securities but lack the expertise to choose the right mix.
  
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  The pension fund entrusts its money to a bank that purchases securities on its behalf and pays fees to the bank for this service.
  
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  Wealthy individuals also hire banks to manage assets, an activity called private banking.
  

What is Private banking?

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  Wealthy individuals also hire banks to manage assets, an activity called private banking.
  

Why Derivatives do not appear on bank balance sheets?

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  Derivatives do not appear on bank balance sheets, because they are not currently assets or liabilities. Rather, they are agreements about future transactions.
  

Why do banks use derivatives?

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  Banks use derivatives to hedge against risks they face, such as changes in interest rates. Some banks also seek income by speculating with derivatives
  

Indicate the correct Investment activities of a bank that appear off-balance sheet:

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