Which of the following best describes a bank loan arrangement where a bank agrees to lend a firm any amount up to a stated maximum in an informal agreement which does not legally bind the bank to provide the funds?

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Quizplus · Accepted Answer

An uncommitted line of credit is an informal agreement where a bank agrees to lend a firm any amount up to a stated maximum, but is not legally bound to provide the funds. This type of loan arrangement is typically used for short-term and temporary financing needs, such as funding seasonal inventory buildup. It is also sometimes referred to as a demand loan or a handshake loan. The other options listed (single, end-of-period payment loan, bridge loan, committed line of credit, and revolving line of credit) all involve different types of loan arrangements with different characteristics.

Which of the Following Best Describes a Bank Loan Arrangement