Big Ticket Technologies holds commercial paper issued by Prude Insurance Corporation that matures in 180 days. However, shortly after Big Ticket purchased the commercial paper, Prude Insurance went out of business. The finance manager for Big Ticket is not worried because his loan to the corporation is secured by collateral that he can now claim.

Question

Quizplus · Accepted Answer

If Prude Insurance Corporation went out of business, it is unlikely that they have sufficient assets or collateral to satisfy their obligations to Big Ticket Technologies. Therefore, it is unlikely that the finance manager for Big Ticket can claim any collateral to secure their investment.

Big Ticket Technologies Holds Commercial Paper Issued by Prude Insurance