Smart Contracts for Finance BFC Practice Questions (Page 7)

Questions 31–35

1. 31foundation · easy

   Which statement best describes how a smart contract automates a financial agreement?

   • AIt requires a human administrator to manually approve each step before execution
   • BIt converts the agreement into a PDF document that is shared among all parties
   • CIt stores the agreement in a centralized legal database that is updated by a notary
   • DIt uses code to trigger actions such as transferring funds or updating records when contract conditions are satisfied
   Reveal Solution Discussion Select an answer first
2. 32application · medium

   A remittance company wants to use smart contracts to offer lower-cost cross-border payments. The company must comply with anti-money laundering (AML) regulations that require transaction monitoring. Which design best integrates AML compliance into the smart contract system?

   • ADeploy on a public blockchain and rely on the immutability of transactions for auditability.
   • BUse a permissioned blockchain with identity verification and transaction monitoring built into the network layer.
   • CUse a smart contract that automatically reports all transactions to a public registry.
   • DUse a private blockchain with no identity checks to preserve user privacy.
   Reveal Solution Discussion Select an answer first
4. 33application · medium

   A smart contract for a decentralized exchange is being audited. The auditor finds that the contract does not check the return value of an external call to a token contract. What is the most likely risk, and what is the best practice to mitigate it?

   • AThe contract may be vulnerable to front-running; use a commit-reveal scheme.
   • BThe contract may be vulnerable to integer overflow; use SafeMath.
   • CThe contract may assume a transfer succeeded when it failed; use a safe transfer library that reverts on failure.
   • DThe contract may be vulnerable to reentrancy; use a mutex lock.
   Reveal Solution Discussion Select an answer first
5. 34foundation · easy

   In decentralized lending, how can a smart contract facilitate a loan?

   • ABy automatically transferring collateral to the lender if the borrower fails to repay
   • BBy sending a reminder email to the borrower when payment is due
   • CBy manually reviewing the borrower's credit score and approving the loan
   • DBy storing the loan agreement in a centralized bank database
   Reveal Solution Discussion Select an answer first
6. 35application · medium

   A microfinance institution wants to automate loan disbursement and repayment for unbanked borrowers who have only feature phones and no consistent internet access. The institution needs to reduce manual processing costs while ensuring that loan terms are enforced transparently. Which approach best meets these requirements?

   • AUse a centralized database with automated scripts to calculate interest and send SMS reminders, keeping all loan records off-chain.
   • BIssue a stablecoin loan directly to the borrower's blockchain wallet and require them to repay using a web-based dApp.
   • CDeploy a smart contract on a public blockchain that releases funds when the borrower's mobile money account receives a repayment confirmation from a trusted oracle.
   • DCreate a smart contract that automatically seizes collateral from the borrower's digital wallet if a repayment is late, without any external input.
   Reveal Solution Discussion Select an answer first