A Principal Difference Between a Line of Credit and a Revolving

question 266

Multiple Choice

A principal difference between a line of credit and a revolving credit agreement is that:

• A)a revolver is a legally binding commitment from the bank to lend up to a stipulated amount.
• B)the borrower must pay a commitment fee on unborrowed money with a line of credit.
• C)the line of credit is an informal agreement but may not be canceled due to a decline in the borrower's financial health during the relatively short period of the agreement.
• D)the bank can cancel a revolver at any time if it refunds the commitment fee.

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