An arrangement in which a bank agrees to lend up to a specified maximum of funds as needed over a specified time period is a
A)compensating balance.
B)line of credit.
C)commercial paper.
D)trade credit.
E)promissory note.

Question

Quizplus · Accepted Answer

The arrangement in which a bank agrees to lend up to a specified maximum of funds as needed over a specified time period is called a line of credit. A compensating balance is a requirement by the lender to maintain a certain amount of money in the borrower's account to compensate for the risk taken by the lender. Commercial paper is a short-term promissory note issued by large corporations. Trade credit is an arrangement in which a seller allows a buyer to pay for goods or services at a later date. A promissory note is a legal document in which one party promises to pay back a debt to another party.

An Arrangement in Which a Bank Agrees to Lend Up