Alco Electronics needs to borrow money to pay for a large capital investment. It is deciding between getting a bank loan and issuing bonds. Which statement is TRUE about the options Alco is considering?
A) A bank loan is part of a loanable funds market, but issuing bonds is not.
B) A bank loan is borrowing from many savers, while issuing bonds is not.
C) A bank loan is borrowing a large amount from one lender, while issuing bonds is borrowing small amounts from many lenders.
D) Issuing bonds is part of the loanable funds market, but a bank loan is not.

Question

Quizplus · Accepted Answer

A bank loan typically involves borrowing a large amount from one lender, while issuing bonds involves splitting the borrowing among many lenders by selling small denominations of bonds. Therefore, the statement that is true about the options is C.

Alco Electronics Needs to Borrow Money to Pay for a Large