Assume That You Borrow $10,000 at an Annual Interest Rate

question 104

Multiple Choice

Assume that you borrow $10,000 at an annual interest rate of 6%. Your loan agreement calls for monthly payments of $200, which include both interest and principal. Your first payment is made one month after you received the loan. The amount of interest and principal applied to your first instalment, respectively, would be:

• A) $60 and $150.
• B) $140 and $60.
• C) $50 and $150.
• D) $150 and $50.

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Definitions:

Financial Management

The strategic planning, organizing, directing, and controlling of financial activities such as procurement and utilization of funds to achieve organizational goals.

Cash Flows

The total amount of money being transferred into and out of a business, often analyzed for evaluating the liquidity, flexibility, and overall financial health of the entity.

Cash-flow Management

The process of monitoring, analyzing, and adjusting a business's cash inflows and outflows, ensuring liquidity and operational stability.

Cash Budget

A financial plan that estimates incoming and outgoing cash flows over a particular period, helping manage liquidity and plan for future needs.