Raul needed an expensive piece of equipment to expand his business.He borrowed the money from the bank and pledged the equipment as ___________.If Raul does not repay the loan,the bank can take his equipment.
A)a promissory note
B)collateral
C)asset in escrow
D)long term debt

Question

Quizplus · Accepted Answer

Collateral is something pledged as security for repayment of a loan. In this case, Raul pledged the equipment as collateral for the loan he borrowed from the bank. If he fails to repay the loan, the bank can take possession of the equipment. Promissory note is a written promise to pay a debt, while asset in escrow refers to funds or property held by a third party until conditions are met. Long term debt refers to debt that is not due for payment within a year. None of these are the appropriate term for Raul pledging his equipment as security for his loan.

Raul Needed an Expensive Piece of Equipment to Expand His