A) A compensating balance 1) typically increases the cost of a loan 2) typically decreases the cost of a loan 3) typically makes no difference in the cost of a loan 4) are rarely required by banks

B) A nonbinding agreement between a bank and a borrower indicating the maximum credit the bank will extend the borrower over a period of time is 1) an example of factoring 2) a balloon loan 3) line of credit 4) revolving credit agreement

C) A legally binding agreement between a bank and a borrower indicating the maximum credit the bank will extend the borrower over a period of time is 1) an example of factoring 2) a balloon loan 3) line of credit 4) revolving credit agreement

D) Factoring of accounts receivable 1) involves the outright sell of receivables 2) involves the use of a financial institution to do credit checking 3) involves using accounts receivables as collateral for a loan 4) both a and b

E) A loan that requires interest only payments over the life of the loan with a lump sum payment of principle at the end is a a) balloon loan b) line of credit c) revolving credit agreement d) mortgage loan

F) To calculate the true cost of borrowing $10,000 for 12 months at 10% compounded annually with a 20% compensating balance one should use the following formula 1) true rate = (interest) / (10,000 + compensating balance) 2) true rate= (interest) / (10,000 compensating balance) 3) true rate = (interest + compensating balance) / (10,000) 4) true rate = (interest - compensating balance) / (10,000)