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Requesting a loan for repair of assembly line equipment

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Question: Colbum Corporation is requesting a loan for repair of some assembly line equipment in the amount of $7 million. The nine-month loan is priced by Farmers Financial Corporation at a 725 percent rate of interest. However, the finance company tells Colbum that if it obtains a suitable credit guarantee the loan will be priced at 7 percent. Quin-mark Batik agrees to sell Colbum a standby credit guarantee for $10,000. Is Colbum likely to buy the standby credit guarantee Quin mark has offered? Please explain.

Reference no: EM131717736

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