An informal line of credit and a revolving credit agreement are similar except that the line of credit creates a legal obligation for the bank and thus is a more reliable source of funds for the borrower.

Question

Quizplus · Accepted Answer

This statement is incorrect as an informal line of credit does not create a legal obligation for the bank and is therefore not a reliable source of funds for the borrower. A revolving credit agreement, on the other hand, does create a legal obligation for the bank to provide funds up to a certain limit, making it a more reliable source of funds for the borrower.

An Informal Line of Credit and a Revolving Credit Agreement