As a short-term arrangement,banks sometimes extend guaranteed lines of credit in which the firm pays a commitment fee on unused portions of the funds the bank has committed.Which of the following describes these arrangements?
A)revolving credit agreements
B)trade credit
C)short-term bank loans
D)commercial paper

Question

Quizplus · Accepted Answer

Guaranteed lines of credit typically refer to revolving credit agreements where the bank commits to providing funds up to a certain limit, and the borrower only pays interest on the funds they actually use. However, to secure this commitment, they may also be required to pay a commitment or standby fee on the unused portion of the credit line.

As a Short-Term Arrangement,banks Sometimes Extend Guaranteed Lines of Credit