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    Question

    Which of the following statements correctly describe the

    features of a revolving credit facility? i. The borrower is sanctioned a credit limit for the commitment period.  ii. Funds can be drawn, repaid, and re-borrowed multiple times during this period.  iii. It sometimes includes an option to convert into a term loan at maturity.  iv. It requires repayment in a fixed number of equal installments like a standard term loan.
    A Only (i) and (ii) Correct Answer Incorrect Answer
    B Only (ii) and (iv) Correct Answer Incorrect Answer
    C (i), (ii), and (iii) Correct Answer Incorrect Answer
    D (i), (iii), and (iv) Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    Solution

    • A revolving credit facility provides a borrower with a credit limit (usually 1 year, extendable). • Within this limit, the borrower can withdraw, repay, and borrow again — making it flexible compared to a term loan. • In some cases, the agreement includes a conversion option, allowing the revolving line to be turned into a term loan at maturity. • Unlike a term loan, revolving credit does not require fixed equal repayments — it is based on usage within the limit.

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