Tanya is arranging for a secured loan from a commercial bank so that h

QUESTION

Tanya is arranging for a secured loan from a commercial bank so that her medical equipment company can purchase state-of-the-art computer systems throughout the company’s headquarters offices.

As collateral for the loan, Tanya argues that the company should use its office building. Which of the following weakens Tanya’s argument?
A) Tanya’s company owns a number of office buildings it’s currently not using.
B) Tanya’s company rents a large fleet of cars and trucks.
C) Tanya’s company intends to use the new computer system to establish a stronger market presence.
D) Tanya’s company is a renter in the office building.
E) A close competitor to Tanya’s company recently used its building as collateral for a loan.

ANSWER

Answer: D
Explanation: D) This weakens Tanya’s argument since Tanya’s company does not own the building and it can offer as collateral only something it owns. Choice A strengthens, rather than weakens, Tanya’s argument—if the company owns several unused office buildings, putting up one for collateral on a loan doesn’t offer much risk to Tanya’s company. Choices B and C are not relevant to loan collateral. Choice E: The circumstances involved with what a competitor did may have been very different from the circumstances in Tanya’s case.