A Committed Line of Credit

question 18

Multiple Choice

A committed line of credit:

• A) guarantees that a set amount of funds will be available to a firm for a stated period of time regardless of events that might occur during that time period.
• B) is a guarantee that a bank will purchase a firm's accounts receivables at full value.
• C) provides greater assurance than a noncommitted credit line that funds will be available when needed by a firm.
• D) guarantees that any funds borrowed during a stated period of time will be charged the lowest rate of interest the lending bank offers to any of its customers.
• E) is a loan arrangement for a stated period of time which is free of all costs and fees other than the actual interest paid on the funds borrowed.

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Definitions:

Binding Price Floor

A government-imposed price control or limit on how low a price can be charged for a commodity, set above the equilibrium price, leading to a surplus of the product.

Surplus

A situation where the quantity of a product or service exceeds the quantity demanded, often leading to lower prices or wasted resources.

Video Game Market

The segment of the entertainment industry involved in the development, marketing, and sale of video games and related merchandise.

Price Ceilings

Regulatory limits on the maximum price that can be charged for a good or service, intended to protect consumers from extreme prices.