Button Ltd has decided to liquidate its business. It has a bank loan of 8m, secured on an a machine carried in the balance sheet at a net book value of 6m. The liquidation value of this asset is considered to be 5m.

Which of the following statements is/ are true concerning the banks recovery of its loan upon the liquidation of Button?

a.

The bank will be guaranteed 5m, and is classed as an unsecured creditor for the remaining 3m

b.

The bank will be guaranteed 6m, and is classed as an unsecured creditor for the remaining 2m

c.

The bank will be guaranteed 6m, and will forfeit the remaining 2m

d.

The bank will be guaranteed 5m, and is classed as a preferred creditor for the remaining 3m