Lenders Require Collateral to

question 5

Multiple Choice

Lenders require collateral to

• A) reduce the risk of default.
• B) reduce the losses if the borrower defaults.
• C) control the borrowing firm.
• D) extend to the borrower an unsecured loan.

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Definitions:

Yearly Dividend

The total dividend payment a company distributes to its shareholders annually, often expressed as a per share amount.

Common Shares

Equity securities that represent ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends.

Reinvesting

The action of using profits or dividends from investments to purchase additional shares or assets, aiming to increase future earnings.

Annual Dividend

The total amount of dividend payments made to shareholders over a one-year period.