The Use of Collateral

question 42

Multiple Choice

The use of collateral

• A)allows banks to charge higher interest rates on loans.
• B)makes it more costly for borrowers to take advantage of their asymmetric information.
• C)makes it more costly for lenders to take advantage of their asymmetric information.
• D)has important tax implications for both borrowers and lenders.

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Definitions:

Accountant-Client Privilege

A legal privilege that keeps confidential communications between an accountant and their client protected from disclosure without the client's consent.

Testify

To give a formal statement of fact or evidence in a court of law, or in a legislative or administrative proceeding.

Disclaimer

A declaration intended to exclude legal responsibility and avoid the possibility of civil litigation for specific actions or neglect.

GAAP

Generally Accepted Accounting Principles, which are a collection of commonly-followed accounting rules and standards for financial reporting.