What is the advantage of a line of credit over a regular loan?
A) collateral is not needed
B) the time frame is longer
C) interest in not charged on unused amounts
D) there is no need for a compensating balance
E) commercial paper is easier to issue
Answer: C
Explanation: Once a line of credit has been established, the business may obtain unsecured loans for any amount up to that limit. The key advantage of a line of credit over a regular loan is that interest (or at least full interest) is usually not charged on the untapped amount.
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