Lenders Recognize That by Having an Interest in Collateral They

question 36

Multiple Choice

Lenders recognize that by having an interest in collateral they can reduce losses if the borrowing firm defaults, ________.

• A) and the presence of collateral reduces the risk of default
• B) but the presence of collateral has no impact on the risk of default
• C) therefore lenders prefer to lend to customers from whom they are able to demand collateral
• D) therefore lenders will impose a higher interest rate on unsecured long-term borrowing

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Definitions:

Interact

The act of communicating or engaging in actions with others, leading to a response or exchange of information.

Coordinate

To organize the different parts of an activity or group efficiently.

Evaluation Apprehension

A psychological concern that people have when they believe their performance is being evaluated by others, which can affect their behavior or performance.

Meetings

Gatherings of people, typically involving discussion, to convey information, make decisions, or solve problems.