In discounting notes receivable, a financial institution generally discounts at a higher interest rate than stated in the note as it assumes _____ risk of maker's possible default.
A) increased
B) decreased
C) equal
D) no

Question

Quizplus · Accepted Answer

Financial institutions assume an increased risk of default when discounting notes receivable, so they usually charge a higher interest rate than the stated rate in the note. This compensates them for the additional risk they are assuming.

In Discounting Notes Receivable, a Financial Institution Generally Discounts at a Higher