Which of the Following Statements Is FALSE

question 9

Multiple Choice

Which of the following statements is FALSE?

• A)With a discount loan,the borrower is required to pay the interest at the end of the loan period.
• B)Bridge loans are often quoted as discount loans with fixed interest rates.
• C)A bridge loan is another type of short-term bank loan that is often used to "bridge the gap" until a firm can arrange for long-term financing.
• D)After a natural disaster,lenders may provide businesses with short-term loans to serve as bridges until they receive insurance payments or long-term disaster relief.

---

Definitions:

Bond Indenture

A legal contract outlining the terms and conditions under which a bond is issued, including the interest rate and maturity date.

Face Amount

The nominal value of a financial instrument as stated on the face of the document, not including interest or earnings.

Contract Rate

The agreed-upon rate for financial transactions or payments defined in a contractual agreement.

Effective Interest Method

A method of computing the amortized cost of a bond and the interest expense over its life by applying a constant interest rate.