Final answer:
The names of specific creditors are generally not included in the note disclosures for long-term debt. Factors like payment history, economic interest rates, and the borrower's financial condition affect the price one might pay for a loan in the secondary market.
Step-by-step explanation:
The question refers to the note disclosures for long-term debt in financial reporting. Among the options provided, the names of specific creditors is generally not included in the note disclosures for long-term debt. The disclosures typically include information about the debt's terms, such as call provisions and conversion privileges, assets pledged as security, and restrictions imposed by the creditor, rather than the identities of the creditors themselves.
The money listed under assets on a bank balance sheet may not actually be in the bank because banks operate on a fractional reserve basis, where only a fraction of the bank's deposits are kept in reserve as cash in the vault or with the central bank. The rest is loaned out to customers, which means that while these loans are considered assets, the money is physically with the borrowers.
When buying loans in the secondary market, the price one might be willing to pay depends on various risk and return factors:
- a. If the borrower has been late on a number of loan payments, the loan is considered riskier, which typically leads to paying less for it due to increased chances of default.
- b. If interest rates in the economy have risen since the bank made the loan, the loan's fixed rate may be less attractive, thus decreasing its value.
- c. If the borrower is a firm that has declared a high level of profits, the loan's risk decreases, making it more valuable and hence you would be willing to pay more for it.
- d. If interest rates have fallen since the bank made the loan, the loan's fixed rate becomes more attractive compared to newer loans with lower rates, increasing its value and making you willing to pay more.