What is a guaranty arrangement?
A) An agreement that collateral can be sold with involvement of the court
B) An agreement by the guarantor that her property can be used to satisfy her debt if she
defaults
C) A pledge by the debtor that the loan will be paid in accordance with its terms
D) A promise to pay the debt of another if that other party fails to pay it
E) The recording of a security agreement so that others will be aware of it
D
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The risk that a debt security's price will fall, subjecting the investor to a potential capital loss is
A. credit risk. B. market risk. C. currency risk. D. liquidity risk. E. political risk.
Copper Industries plans to issue 8-year, 8%, $100,000 bonds paying interest on an annual basis, at a $2,000 premium. Which one of the following statements is true?
A. The cash paid to bondholders will be $2,000 each interest period. B. Copper's annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year. C. Copper will receive $98,000 as the issue price. D. Copper's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year.