In many cases,a bank requires a borrower to maintain a(n)________,in which the borrower must keep a portion of the loan amount on deposit with the bank in a non-interest-bearing account.
A) compensating balance
B) unsecured loan
C) angel investor
D) venture capital

Question

Quizplus · Accepted Answer

A compensating balance is a requirement by a lender for a borrower to maintain a certain amount of funds in a non-interest-bearing account as a condition for issuing the loan. This is a way for the lender to offset the risk of lending money to the borrower by ensuring that they have access to some of the borrower's funds in case of default. Unsecured loans, angel investors, and venture capital do not involve the concept of compensating balance requirements.

In Many Cases,a Bank Requires a Borrower to Maintain A(n)________,in