A Principal Difference Between a Line of Credit and a Revolving

question 266

Multiple Choice

A principal difference between a line of credit and a revolving credit agreement is that:

• A)a revolver is a legally binding commitment from the bank to lend up to a stipulated amount.
• B)the borrower must pay a commitment fee on unborrowed money with a line of credit.
• C)the line of credit is an informal agreement but may not be canceled due to a decline in the borrower's financial health during the relatively short period of the agreement.
• D)the bank can cancel a revolver at any time if it refunds the commitment fee.

---

Definitions:

Demand Curve

An illustrated chart that displays the connection between a product's price and the amount consumers want to buy.

Quota

Trade limitations set by the government which restrict the amount or fiscal value of products that can be brought in or sent out over a certain period.

Demand Price

The maximum amount consumers are prepared to spend on a product or service for a specific quantity.

Taxicab Medallions

License plates issued by a local government authority that allow a vehicle to operate as a taxi.