Final Answer:
When both contracts are exercised, the unexercised credit widens. the correct statement is 4) The unexercised credit widens.
Step-by-step explanation:
The unexercised credit widens when individuals do not utilize the full extent of their available credit. This phenomenon occurs when people have access to a certain amount of credit but choose not to use it, resulting in a gap between the available credit limit and the actual credit used. the correct statement is 4) The unexercised credit widens.
Unutilized Credit: This refers to the portion of credit that remains untouched by the individual. It could be in the form of a credit card limit or a pre-approved loan amount.
Widening Gap: The term "widens" indicates an increase in the difference between the available credit and the utilized credit. In other words, as people refrain from using their full credit limit, the gap between what they could borrow and what they actually borrow widens.
Factors Influencing Unexercised Credit: Several factors contribute to unexercised credit, including financial prudence, risk aversion, or simply not having a need for additional funds at a given time.
Consequences: While having unexercised credit can be a responsible financial choice, it may also impact credit scores and limit opportunities for building a positive credit history.