Which of the following statements is true? a. A line of credit is a legal obliga

Question

Which of the following statements is true?
a. A line of credit is a legal obligation between the borrowerand the bank detailing the maximum amount of credit that the bankwill provide the borrower at any one time. b. A revolving credit agreement is an informal agreement orunderstanding between the borrower and the bank about the maximumamount of credit that the bank will provide the borrower at any onetime. c. A compensating balance is a part of the line of creditrequired to be maintained in the bank through the loanperiod. d. All of the above are true statements. Which of the following statements is true?
a. A line of credit is a legal obligation between the borrowerand the bank detailing the maximum amount of credit that the bankwill provide the borrower at any one time. b. A revolving credit agreement is an informal agreement orunderstanding between the borrower and the bank about the maximumamount of credit that the bank will provide the borrower at any onetime. c. A compensating balance is a part of the line of creditrequired to be maintained in the bank through the loanperiod. d. All of the above are true statements.

Explanation / Answer

A line of credit is a formal or informalagreement between a bank and a borrower concerning themaximum loan a bank will allow the borrower for a one-yearperiod. Line of Credit is not a legal commitment. A revolving credit agreement is a legalcommitment between the borrower and the bank about themaximum amount of credit that the bank will provide the borrower at any onetime. Thus, Answer is Option (c) A compensating balance is apart of the line of credit required to be maintained in the bankthrough the loan period.

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