If a Loan Has a Probability of Not Being Paid

question 34

Multiple Choice

If a loan has a probability of not being paid back, the interest rate will:

• A)likely include a risk premium.
• B)be the real interest rate.
• C)insufficient to compensate bondholders.
• D)lower than the market interest rate.

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Definitions:

Factory Labor

The workforce engaged in the manufacture of goods, particularly those who are directly involved in producing products in a factory setting.

Standard Cost Accounting System

An accounting framework that uses cost units determined in advance for materials, labor, and overhead to value inventories and cost of goods sold.

Gross Profit

The excess of net sales over the cost of goods sold.

Balanced Scorecard Approach

A strategy performance management tool that views an organization from four perspectives: financial, customer, process, and learning and growth.