Question

Debt contracts:A) are agreements by the borrowers to pay the lenders fixed dollar amounts at periodic intervals.B) have a higher cost of state verification than equity contracts.C) are used less frequently to raise capital than are equity contracts.D) never result in a loss for the lender.

Answer 1

Answer: A) are agreements by the borrowers to pay the lenders fixed dollar amounts at periodic intervals.

Explanation: A debt contract is an agreement in which a borrower agrees to repay funds borrowed to a lender. Usually classes into a short-term and long-term debt contracts, they are used in raising money for working capital or capital expenditures and in return for lending the money, the individuals or institutions become creditors and receive a promise that the capital and interest on the debt will be repaid (usually in fixed amounts over a period of time) in accordance with the terms of the contract. Debt contracts include detailed provisions on collateral involved, interest rate, the schedule for interest payments, and the timeframe to maturity if applicable.

Answer 2

A) are agreements by the borrowers to pay the lenders fixed dollar amounts at periodic intervals.

Step-by-step explanation:

Debt contracts are formed when a borrower agrees to repay a lender. Convenants are usually used to settle disputes between the borrower and the lender. Convenants limits the the extent to which debtors take risks, dividend payouts, claim dilution, and other activities that can cause the lender to lose money.

Debt contracts are obtained by businesses to finance short term operations activities or long term expansion plans.