A Firm Has Borrowed $1 Million and Assigned Its Receivables

A firm has borrowed $1 million and assigned its receivables to the lender. Because of defaults, the receivables prove insufficient to cover the debt. In this case, the:

A) lender bears the risk of default.
B) firm bears the risk of default.
C) default risk is shared between lender and firm.
D) insurance carrier will bear the risk.

Correct Answer:

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