A Contingent Promise by a Bank to Pay a Bill

question 36

Multiple Choice

A contingent promise by a bank to pay a bill when it comes due if the bill's originator fails to pay is an example of a

• A)swap agreement.
• B)standby letters of credit.
• C)forward contract.
• D)loan commitment.
• E)commitment to buy foreign exchange.

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Definitions:

Long-Term Lease Liabilities

Financial obligations resulting from leasing contracts that extend beyond one year, recorded on the balance sheet under liabilities.

Compound Interest

A method where interest is calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.

Equal Annual Withdrawals

A method of evenly distributing the total amount of an investment or asset over a fixed number of years.

Compounded Annually

A method of calculating interest where the earned interest is added to the principal at the end of each year, increasing the amount that will earn interest in the following year.