Which of the Following Statements Regarding Loan Collateral Is True

question 3

Multiple Choice

Which of the following statements regarding loan collateral is true?

• A) Loans secured by collateral always have higher finance charges than unsecured loans.
• B) Collateral is an item of value used to secure the principal portion of a loan.
• C) Collateral is always required by banks to lend to customers with good credit ratings.
• D) Collateral is an item of value used to secure the interest portion of a loan.
• E) Loans are secured by collateral that is readily marketable at a price high enough to cover the interest portion of the loan.

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Definitions:

Safety Inventory

Extra inventory held to guard against uncertainty in the demand or supply chain, ensuring that shortages are minimized.

Demand Uncertainty

The lack of predictability in consumer demand for products or services, making inventory or production planning challenging.

Coefficient Of Variation

A statistical measure of the relative dispersion of data points in a data series around the mean, expressed as a percentage.

Safety Inventories

Additional stocks held beyond expected demand to mitigate the risk of stockouts due to demand and supply variability.