Which of the following offers no protection for a firm’s lenders? (please provide the correct answer...

Which of the following offers no protection for a firm’s lenders? (please provide the correct answer and explain it. Also provide detailed explanation in relation to other parts, why other parts are not correct).

(a) a fixed charge

(b) a fixed rate loan

(c) a covenant

(d) a guarantee offered by a third party

Expert Solution

The answer is option B. The interest rate charged on the loan will remain fixed during the period of loan but the capital value of a fixed rate loan is generally determined as a function of future interest rates at the time of calculation. This means that they contain a capital risk, in that if interest rates fall, the capital value of the loan rises, and vice versa

Option C is not the correct answer because covenents are limits or restriction on certain actions the company might be taking during the term of agreement. So they provide protection to firm's lenders.

Option D is not the correct answer because a guarantee offered by a third party is a legal promise made by a third party to cover a borrower's debt or other types of liability in case of the borrower's default.

Option A is not the correct answer because when a company borrows money as a fixed charge the lender will require security in the form of a fixed charge. This protects them from the risk of default.

jeff jeffy answered 1 year ago

Please provide correct answer for income tax on budgeted income statement. Please provide correct answers for...

Please provide correct answer for income tax on budgeted income statement. Please provide correct answers for income taxes payable and retained earnings on the budgeted balance sheet. All other answers are correct. Thank you! The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2017: ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2017 Assets Cash $ 57,000 Accounts receivable 464,000 Raw materials inventory 91,600 Finished goods inventory 380,480 Total current assets 993,080 Equipment, gross 634,000 Accumulated depreciation...

Which of the following is correct for the Credit Swaps? Select one: a. Diversify the lenders’...

Which of the following is correct for the Credit Swaps? Select one: a. Diversify the lenders’ risk b. Not very liquid c. All of these d. Reduce the credit risk of the lenders

Which of the following statements is NOT correct? (Please explain why answer E is correct) a)corporate...

Which of the following statements is NOT correct? (Please explain why answer E is correct) a)corporate governance is the set of rules that control a company's behavior towards its directors, managers, employees, shareholders, creditors, customers, competitors, and community b) agency problem is that managers may act in their own interests and not on behalf of stockholders. c) Corporate governance is the set of rules that control a company's behavior towards its directors, managers, employees, shareholders, creditors, customers, competitors, and community....

Which of the following statements is correct? a. A firm’s equity is similar to a call...

Which of the following statements is correct? a. A firm’s equity is similar to a call option with the value of the preferred stock being the strike price. b. Someone who buys a straddle position is anticipating that the stock will experience significant price changes. c. Buying a put can be considered to be a form of life insurance. d. Price volatility is not a major factor in valuing options. e. The maximum value a long put can take is...

Q1. Which statement is not correct?.Regulators seek to provide protection to depositors at financial institutions because...

Q1. Which statement is not correct?.Regulators seek to provide protection to depositors at financial institutions because deposits are: a. the main source of funding for banks b. the primary form of savings for individuals and loss of deposits causes significant hardship for depositors c. a preferable form of high risk investments d. a critical part of the financial system as they facilitate economic transactions. Q2. The delta of an option refers to the change in the value of an: a....

Please explain correct answer 11. Which of the following is the component of GDP that tends...

Please explain correct answer 11. Which of the following is the component of GDP that tends to fluctuate the most from year-to-year in percentage terms? a. Consumption b. Investment c. Government spending d. Money supply 12. Assume that the economy starts from the long-run equilibrium. If the Federal Reserve increases the money supply, then _____________ increase(s) in the short-run and ____________ increase(s) in the long-run. a. Prices, output b. Output, prices c. Output, output d. Prices, prices 13. In the...

Please give a brief justification for the correct answer you select: Which of the following is...

Please give a brief justification for the correct answer you select: Which of the following is NOT included in 2004’s GDP? The value of a car produced in the United States and exported to England. The profit earned in 2004 from selling a stock that you purchased in 2001. The value of a computer chip that is used in the production of a personal computer. The commission earned by an employment counsellor when she locates a job for a client....

Which of the following statements is correct: The Fair Trading Act provides for consumer protection and...

Which of the following statements is correct: The Fair Trading Act provides for consumer protection and the Consumer Guarantees Act does not The Fair Trading Act is the only statute that provides for Consumer Protection The Consumer Guarantees Act is the only statute that provides for Consumer Protection Both the Fair Trading Act and the Consumer Guarantees Act provide for Consumer Protection Which of the following statements is not correct? The Fair-Trading Act applies to both goods and services The...

which of the following statements is correct regarding a firm’s decision making? a. shut down and...

which of the following statements is correct regarding a firm’s decision making? a. shut down and exit are both long run decisions b. exit is a short run decision and shutdown is a long run decision c. Shut down is a short run decision and exit is a long run decision d. shut down and exit are both short run decision

Please provide me a correct and clear answer for this question. Physical and chemical properties of...

Please provide me a correct and clear answer for this question. Physical and chemical properties of propylene glycol methyl ether Please attach the references Thanks in advance

Question