Which of the following is NOT a typical characteristic of a fronting loan made to an international subsidiary?
A) The parent makes a deposit equal to the size of the desired loan into a large commercial bank.
B) The bank lends to the subsidiary firm an amount equal to the parent deposit at a slightly higher interest rate.
C) The lending bank is located in the subsidiary's country.
D) All of the above are typical characteristics of a fronting loan.

Question

Quizplus · Accepted Answer

A fronting loan typically involves a large commercial bank in the parent company's country making a loan to the subsidiary, often with the parent making a deposit equal to the size of the loan. The loan may be at a slightly higher interest rate than the deposit, and the lending bank is typically located in the parent company's country, not the subsidiary's country. Therefore, option C is the answer, as it is not a typical characteristic of a fronting loan.

Which of the Following Is NOT a Typical Characteristic of a Fronting