A Captive Finance Company Is One That

question 29

Multiple Choice

A captive finance company is one that

• A)is owned by a retailer or manufacturer.
• B)is owned by a bank holding company.
• C)is owned by its depositors.
• D)lends only to high-risk individuals that cannot obtain loans elsewhere (i.e.,captives).
• E)is regulated at the federal level.

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Definitions:

Variable Rate

An interest rate that can change over time, often based on an underlying benchmark interest rate or index that reflects the cost of borrowing in the credit markets.

Forward Contract

An agreement that isn't standardized between two parties to purchase or sell an asset at a future date determined today at a price agreed upon today.

Legally Binding

An agreement enforceable by law, with obligations that must be fulfilled by all parties involved.

Agreed-upon Price

The price that has been mutually accepted by the buyer and seller in a transaction.