Allen imports furniture from China.He travels to his suppliers' businesses three times a year to inspect how the furniture is made,the conditions at the factory,and how much workers are paid.When he is satisfied that the supplier meets his standards for humanitarian treatment of workers and ethical work practices,he places an order for furniture to be made by the company.The suppliers usually require part of the payment upfront or proof that payment will be made on delivery.Because Allen has been in business for many years,and has used the same bank for his business for the entire time he has been in business,he works out an agreement with his banker that the bank will advance him funds for a short-term at prime interest rate plus two percent.What kind of transaction did Allen enter into with the bank?

Question

Quizplus · Accepted Answer

Allen entered into an unsecured bank loan agreement with his banker. The agreement allows Allen to borrow funds at the prime interest rate plus two percent for a short-term period. This means that Allen does not provide any collateral or security to the bank in exchange for the loan.

Allen Imports Furniture from China