Under Which of the Following Conditions Would You Prefer to Be

question 34

Multiple Choice

Under which of the following conditions would you prefer to be the borrower?

• A) The nominal rate of interest is 12 per cent and the inflation rate is 9 per cent.
• B) The nominal rate of interest is 20 per cent and the inflation rate is 25 per cent.
• C) The nominal rate of interest is 5 per cent and the inflation rate is 1 per cent.
• D) The nominal rate of interest is 15 per cent and the inflation rate is 14 per cent.

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Definitions:

Operating Costs

Expenses associated with the ongoing operations of a business, such as wages, rent, and utilities, excluding costs linked to producing goods.

Computer System

An integrated set of hardware and software designed to process, manage, and store data.

Capital Cost Allowance (CCA)

A tax deduction in Canada that represents a business’s investment in depreciable property.

Earnings Before Interest And Taxes

A measure of a firm's profitability that includes all income and expense items except interest and income tax expenses.