Asked by Kaylie Katsiris on Apr 28, 2024
Verified
A revolving credit agreement:
A) is similar to a line of credit except that it is binding on the bank.
B) does not guarantee the availability of funds.
C) requires the lender to pay a commitment fee.
D) Both a& c.
E) All of the above
Revolving Credit Agreement
A credit arrangement that allows a company or individual to borrow, repay, and borrow again up to a certain credit limit.
Commitment Fee
A fee charged by a bank for guaranteeing to have loanable funds available. The fee is charged on un borrowed amounts up to the maximum of the guarantee. See Revolving credit agreement.
Line of Credit
An arrangement between a financial institution and a customer that establishes a maximum loan balance the borrower can access.
- Absorb the details and conditions linked to several short-term credit contracts.
Verified Answer
JR
Juancho ReynalApr 30, 2024
Final Answer :
D
Explanation :
A revolving credit agreement is similar to a line of credit in that it provides flexible access to funds that can be borrowed and repaid as needed, but it is binding on the bank, meaning that the bank is required to lend the funds when requested. However, the agreement does not guarantee the availability of funds, and the lender typically charges a commitment fee for maintaining the line of credit. Therefore, choice D is the best answer.
Learning Objectives
- Absorb the details and conditions linked to several short-term credit contracts.