Chapter 4, Problem 5AA

To determine

To analyze the option best suited for the blank.

Explanation of Solution

The term loan refers to the type of debt vehicle in which an amount of funding is lent to another party to the contract for a future refund of the interest or principal amount.

In certain situations, the creditor often applies interest and/or loan costs to the principal amount that the borrower must return in addition to the principal amount. Loans may be for a fixed, one-time sum, or may be available as an open-ended credit facility up to a specified cap.

Loans give people access to goods that they might not be able to afford otherwise.