A(n)_________________________________________ Is a Contractual Promise by a Bank to Lend

question 53

Short Answer

A(n)_________________________________________ is a contractual promise by a bank to lend to a customer up to a maximum amount of money at a set interest rate (or rate markup over the rate prime or LIBOR).The only way the bank can renege on its promise is if there has been a "material adverse change" in the borrower's financial condition.

---

Definitions:

Semiannual Interest

Semiannual interest refers to the interest payment made two times a year on a loan or bond.

Present Value

The present valuation of a future financial sum or cash flow series, factoring in a specific return rate.

Compound Interest

Interest earned on both the initial principal and the accumulated interest from previous periods on a deposit or loan.

Bond

A financial instrument in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period at a specified interest rate.