Consider the following statements: Statement I: Syndicated lending spreads the risk of borrower default across multiple lenders.

Consider the following statements:

Statement I: Syndicated lending spreads the risk of borrower default across multiple lenders.
Statement II: The syndicated loan can be a fixed amount/lump sum of funds, but cannot be a credit line.

Which one of the following is correct in respect of the above statements?

(a) Both Statement I and Statement II are correct and Statement II explains Statement I
(b) Both Statement I and Statement II are correct, but Statement II does not explain Statement I
(c) Statement I is correct, but Statement II is incorrect
(d) Statement I is incorrect, but Statement II is correct

Correct Answer: (c) Statement I is correct, but Statement II is incorrect

Explanation:

• Statement I is correct. Syndicated lending indeed spreads the risk of borrower default across multiple lenders.
• Statement II is incorrect. Syndicated loans can be structured as either a fixed amount/lump sum or a revolving credit line. Possible Sources: Banking and finance textbooks.