Question

Which of the following is the percentage of an unsecured loan that is retained by the financier in order to protect it and to raise its yield?

1) Leverage
2) Bond
3) Compensating balance
4) Trade credit
5) Collateral

Answer 1

The correct answer is Compensating balance. A compensating balance is a certain percentage of an unsecured loan that is retained by the financier in order to protect it and raise its yield.

Step-by-step explanation:

The correct answer is Compensating balance. A compensating balance is a certain percentage of an unsecured loan that is retained by the financier in order to protect it and raise its yield. This means that the borrower is required to maintain a minimum balance in their account with the lender.