You Have a 5-Year Amortized Loan with a Nominal Rate

question 42

Multiple Choice

You have a 5-year amortized loan with a nominal rate of 11% and annual payments of $541.14.What is the original (time 0) principal of the loan?

• A) $2,000.00
• B) $2,705.70
• C) $2,289.31
• D) $1,678.86
• E) $2,051.35

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Definitions:

MB = MC

The principle that optimal decision-making is achieved when the marginal benefit equals the marginal cost.

Unintended Consequences

Outcomes of a policy or action that were not foreseen or intended, often contrary to the original objectives.

Allocating Resources

The process of distributing available resources among various competing needs or projects in an efficient manner.

Invisible Hand

Adam Smith's metaphor describing the self-regulating nature of the marketplace that guides individuals to unintentionally benefit society through personal gain.