Which of the Following Situations Is Similar to the Externality

Multiple Choice

Which of the following situations is similar to the externality effect?

A) Exercising an adverse material change in conditions clause as a last resort, thereby cancelling or repricing a loan commitment.
B) Increase in the cost of funds above normal levels while many FIs scramble for funds to meet their commitments to customers during a credit crunch.
C) In a loan commitment, the borrower takes down only part of the funds over the specified time period.
D) The buyer of a commercial letter of credit fails to perform as promised under a contractual obligation.