Chapter 4, Problem 12AA

To determine

To analyze: The similarity between taking a loan and buying an item on credit.

Explanation of Solution

The term loan refers to the type of lending instrument in which an amount of wealth is lent to the next companies in return for a potential repayment of the interest or principal amount.

When buying something on a credit, the person acquires the item immediately, but pays for it at a later date.

So, the similarity between both is that the person has to repay it after some time in future.