7. What is a "line of credit"? A) A penalty for missed payments B) A pre-approved borrowing limit from which you can draw as needed C) A one-time loan with fixed payments D) A contract for leasing property

The correct answer is: **B) A pre-approved borrowing limit from which you can draw as needed** **Explanation:** A *line of credit* is a flexible loan from a financial institution that provides you with a maximum amount you can borrow. You can access funds as needed, repay them, and borrow again within the agreed-upon limit. This setup is different from a traditional loan where you receive a lump sum upfront and make fixed payments over time. **Why the other options are incorrect:** - **A) A penalty for missed payments:** This describes a late fee or penalty, not a line of credit. - **C) A one-time loan with fixed payments:** This refers to a standard installment loan, not a line of credit. - **D) A contract for leasing property:** This describes a lease agreement, which is unrelated to lines of credit.