Which of the Following Is True of an 'Adverse Material

question 91

Multiple Choice

Which of the following is true of an 'adverse material change in conditions clause' used in a loan commitment?

• A)It allows the FI to cancel or reprice a loan commitment.
• B)It protects the lender against takedown risk.
• C)It protects the lender against basis risk.
• D)Exercise of the clause helps defaulted borrowers.
• E)It is exercised frequently by most FIs.

---

Definitions:

Flexible Budget Amounts

Budgeted figures that can adjust based on changes in activity levels or other factors, unlike a static budget.

Variable Costs

Expenses that change in proportion to the volume of production or sales, including components like raw materials and direct labor costs.

Fixed Costs

Expenses that do not change with the level of goods or services produced within a certain time span.

Operating Income

The profit realized from a business's core operations, excluding deductions of interest and taxes.