Mike Deposited $100, 000 in a Bank and Procured a Certificate

question 30

Multiple Choice

Mike deposited $100, 000 in a bank and procured a certificate of deposit on it, payable to himself, and for repayment in 5 years with a 5 percent interest rate.A year after that, Mike borrows $25, 000 from Jill, and gives her a promissory note to repay it in one year.As collateral, Mike gave Jill the certificate of deposit and asked to put in a prepayment clause to which Jill agreed.They mutually agreed that Mike could repay in monthly payments, as mentioned it in the note.
-In which of the following ways will the prepayment clause help Jill?

• A)It helps Jill to shorten the repayment period when she wishes.
• B)It helps Jill acquire the whole amount in one payment incase Mike defaults.
• C)It allows Mike to repay earlier than the stipulated time.
• D)It obligates Mike to pay interest on the money he defaults.

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Definitions:

Consumer Credit Laws

Consumer credit laws are regulations implemented to protect borrowers of credit, ensuring fairness and transparency in lending practices.

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An unexpected or sudden event involving a family member that requires immediate attention, often necessitating absence from work or other responsibilities.

Slammed

In a business context, being overwhelmed or heavily criticized; in telecommunications, it refers to the unauthorized switch of a service provider.

Telephone Bill

A statement of charges for telecommunication services rendered during a billing period.