A Firm Has Borrowed $1 Million and Assigned Its Receivables

question 3

Multiple Choice

A firm has borrowed $1 million and assigned its receivables to the lender.Because of defaults, the receivables prove insufficient to cover the debt.In this case, the:

• A)Lender bears the risk of default
• B)Firm bears the risk of default
• C)Default risk is shared between lender and firm
• D)Insurance carrier will bear the risk

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