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

---

Definitions:

LAN

Local Area Network; a computer network that interconnects computers within a limited area such as a residence, school, or office building.

Universal Service

A principle that aims to provide all citizens access to essential telecommunications services at an affordable price.

Coaxial

A type of cable that is used for transmitting television signals, internet connectivity, and other data.

Fiber Optic

Technology that uses thin, flexible fibers of glass or other transparent solids to transmit light signals for telecommunications or computing.