Question

Root capital is using​ ________ for which the borrower promises to repay the borrowed amount​ (the principal) plus a predetermined rate of interest.

Answer 1

Root capital is using​ debt loan for which the borrower promises to repay the borrowed amount​ (the principal) plus a predetermined rate of interest.

When you take out a loan, most common a debt loan, you are borrowing an amount of money plus a set interest rate. For example, when you buy a home.. you will purchase it for X amount of dollars, for 30 years (most common) at an X amount of interest. As long as you have a fixed interest rate, the rate won't change during the lifespan of your loan. The interest accrued on your debt will be kept by the lender for their services. 

Answer 2

Root capital is using debt/bond for which the borrower promises to repay the borrowed amount plus the interest.

Further Explanation:

Root Capital:

Root Capital is a not-for-profit fund that operates in the poor and rural areas of America and Asia. Root Capital provides the finance, advise and catalyze services. It disburses the loan to the rural community of the developing country. Root Capital invests the fund in the agriculture sector.  

The root is a not-for-profit fund, so it does not deal with the equity. It only invests in the debt. The debt is the safest investment option, and root capital does not focus on capital profit making. The main aim of the root capital is to provide better resources to the rural economy of the world. So it invests in the debt fund. Debt funds are less risky and offer fewer returns.

Bond:

Bond is a financial instrument that is used for raising funds from the outside of the entity. The Capital is a loan agreement between the issuer and the bondholder where the issuer borrows the funds from the bondholder. The issuer has to pay the principal and the interest on the bond to the bondholder. The browser has a maturity date on which the issuer has to pay the principal (borrowed funds). Generally, the issuer pays the interest on the bond during the tenure of the bond.

Use of funds by the root capital:

Root capital uses fewer debt funds for generating invest revenue. The root is non-for-profit fund provides it does not invest in the capital. It is a disburses fund, and debt is the safest investment option. Therefore, root capital invests in debt where the borrower promises to repay the risk amount.

Thus, the root capital uses the debt/bond for the invest alternate.

Learn more:

1. Learn more about the loaning the money

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2. Learn more about the cash deficiency

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3. Learn more about the fund with low liquidity

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Answer details:

Grade: Senior School

Subject: Accounting

Chapter: Bonds & Debentures

Keywords: Root capital, is using, for, which, the borrower, promises, to, repay, the, borrowed, amount, the principal, plus, a, predetermined, rate, of interest.