Which of the Following Is Correct

question 9

Multiple Choice

Which of the following is correct?

• A) Savers develop expertise in evaluating creditworthiness.
• B) Borrowers develop expertise in structuring loans.
• C) Borrowers develop expertise in enforcing loan contracts.
• D) Banks reduce the transaction costs of channeling savings to creditworthy borrowers.
• E) Banks increase the transaction costs of channeling savings to creditworthy borrowers.

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Definitions:

Unearned Interest: Leases

Interest on a lease that has been collected in advance by the lessor but not yet earned, often requiring adjustment in accounting records.

Present Value Factors

Present value factors are used to calculate the present value of a future amount of money or stream of cash flows given a specified rate of return.

Lease Payment

Regular payments made by a lessee to a lessor for the use of an asset, as agreed upon in a lease contract.

Sales-Type Lease

A lease arrangement that allows the lessor to recognize profit at the inception of the lease due to the transfer of ownership or the realization of a sales profit beyond interest income.