Which of the Following Instances of Lending Is Most Likely

question 63

Multiple Choice

Which of the following instances of lending is most likely to be covered by the Truth in Lending Act (TILA) ?

• A)A savings and loan association extends a $30,000 credit to a retail consumer.
• B)An auto retailer extends a $25,000 credit to a buyer payable in five equal installments.
• C)An accountancy firm extends a $10,000 one-time credit to an employee.
• D)A bank extends a $20,000 credit to a farmer for use in agricultural purposes.

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Definitions:

Immunize

A strategy in finance to shield a portfolio from interest rate movements by aligning the duration of assets and liabilities, thus stabilizing its overall value.

Interest Rate Risk

The potential for investment losses caused by fluctuations in interest rates, affecting debt securities inversely with their prices.

Treasury Bonds

Long-term government securities issued by the U.S. Department of the Treasury with a maturity period typically ranging from 20 to 30 years.

Corporate Bonds

Debt securities issued by corporations to finance their operations, typically offering fixed interest payments and repayment of principal at maturity.