Imagine That You Borrow $5,000 for One Year and at the End

question 120

Multiple Choice

Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus $600 of interest.If the inflation rate was 4%,what was the real interest rate you paid?

• A)16 percent
• B)12 percent
• C)8 percent
• D)6 percent

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Definitions:

Market Price

The amount at which something can be bought or sold on a given market.

Gross Margin Percentage

A financial metric that measures a company's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold (COGS).

Return On Equity

A financial ratio indicating the profitability of a firm in relation to its shareholders' equity, measuring how much profit is generated from the equity.

Return On Equity

calculates the amount of net income returned as a percentage of shareholders equity, measuring a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.