Question

Define sweep account and a loan syndication and explain how each are used. What is the general structure of a trust?

Answer 1

1a)Sweep Account

A sweep account is an account set up at a bank or other financial institutions where the funds are automatically managed between a primary cash account and secondary investment accounts.

A sweep accounts combines two or more accounts at a bank or a financial institution,moving funds between them in a predetermined manner.Sweep accounts are usseful in managing a steady casf flow between a cash account used to make scheduled payments and an investment account where the cash is able to accrue a higher return.

b)Loan Syndication:

Laon syndication is the process of involving a group of lenders in funding various portions of a loan for a single borrower.

Loan syndication is mostly used when a borrower requires an amount too large for a single lender to provide or when the loan is outside the scope of a lender's risk exposure levels.Then,multiple lenders form a syndicate to provide the borrower with the requested capital.

2.A trust is a relationship where a trustee(an individual or a company) carries on business for the benefit of the other people (benefiaciaries).A trust is not a separate legal entity.The trustee is legally liable for the debt of the trust and may use ist assets to meet those debts.Commonly,the trustee is a company,often this business structure is more tax effective.