Debt contracts
A)are agreements by the borrowers to pay the lenders fixed dollar amounts at periodic intervals.
B)have a higher cost of state verification than equity contracts.
C)are used less frequently to raise capital than are equity contracts.
D)never result in a loss for the lender.

Question

Quizplus · Accepted Answer

Debt contracts involve borrowers agreeing to pay lenders fixed amounts at intervals, making option A the correct choice. Option B is incorrect because equity contracts require more state verification than debt contracts. Option C is also wrong because debt contracts are typically used more often than equity contracts when it comes to raising capital. Finally, option D is incorrect because there is always a risk of loss for the lender in debt contracts.

Debt Contracts