Which of the following is a characteristic of a typical private placement of debt?
A) It carries a variable interest rate.
B) Its maturity is shorter than most bank loans.
C) Because of the higher risk, more restrictions are imposed on the borrower than with a comparable bank loan.
D) It operates much like a bond, but its terms are tailored to the borrower's individual needs, as a loan would be.

Question

Quizplus · Accepted Answer

A private placement of debt operates much like a bond, but its terms are tailored to the borrower's individual needs, as a loan would be. The borrower negotiates the terms of the debt with a group of investors, rather than issuing it publicly like a traditional bond. The interest rate and maturity can be variable or fixed, and the restrictions imposed on the borrower may be less stringent than with a comparable bank loan, as the investors have more flexibility in negotiating the terms.

Which of the Following Is a Characteristic of a Typical