Part 1Which of the following may not be used as a backup line of credit? Part 2
A. Standby letters of credit B. Mortgages C. Loan commitments D. Overdraft privileges

Question

Part 1Which of the following may not be used as a backup line of​ credit? Part 2
A. Standby letters of credit B. Mortgages C. Loan commitments D. Overdraft privileges

BlackTom AI · Accepted Answer

In this question, we assess which item may not function as a backup line of credit.
Option A: Standby letters of credit. These instruments provide a guarantee of payment from a bank if the applicant fails to perform, and they can act as a backup line of credit in certain contexts, so this is a plausible backup facility.
Option B: Mortgages. A mortgage is a long-term secured loan on real estate and is not typically used as a responsive backup line of credit for ongoing, short-term liquidity needs. Mortgages are structured credit products with specific amortization and release conditions, making them unsuitable as a routine backup credit line.
Option C: Loan commitments. A loan commitment is an agreement by a lender to supply a specified amount of funds to a borrower upon request, effectively functioning as a ready backup line of credit, so this can be used as such.
Option D: Overdraft privileges. Overdraft protection or privileges authorize the account to borrow shortfalls up to a limit, clearly serving as a backup line of credit for everyday account activity, so this is a valid backup facility.

Taken together, the statement that cannot be used as a backup line of credit is Mortgages, because its purpose and structure differ from revolving or contingent credit facilities and it is not typically drawn upon as a flexible liquidity backup.

Homework:Chapter 9 Homework

Part 1Which of the following may not be used as a backup line of credit? Part 2 A. Standby letters of credit B. Mortgages C. Loan commitments D. Overdraft privileges

View Explanation

Log in for full answers

Similar Questions

In a consumer society, many adults channel creativity into buying things

Economic stress and unpredictable times have resulted in a booming industry for self-help products

People born without creativity never can develop it

A product has a selling price of $20, a contribution margin ratio of 40% and fixed cost of $120,000. To make a profit of $30,000. The number of units that must be sold is: Type the number without $ and a comma. Eg: 20000

Which of the following statement regarding cost is correct:

Under the assumptions used in cost-volume-profit analysis, as the activity increases:

The CVP and break-even analysis are supported by a range of important assumptions. Which of the following is not an assumption of the CVP:

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler