A Term-Loan Agreement Requires the Borrower to Repay the Loan

question 220

True/False

A term-loan agreement requires the borrower to repay the loan in one lump sum at the end of the loan period.

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Definitions:

Taxes

Mandatory monetary payments or fees imposed by the government on people or organizations to finance public spending.

Bankruptcy Claims

Financial demands made by creditors against a debtor who has declared bankruptcy.

Debt/Equity Ratio

The financial ratio that illustrates the use of shareholders' equity versus debt in funding company assets.

M&M Proposition II

A firm’s cost of equity capital is a positive linear function of its capital structure.