A) Karen, Who Loans a Friend $3500, and Whose Friend

question 70

Multiple Choice

$$\begin{array} { | l | l | l | l | l | l | } \hline \begin{array} { l } \text { Date } \\\text { (years) }\end{array} & 0 & 1 & 2 & 3 & 4 \\\hline \begin{array} { l } \text { Cash } \\\text { Flows }\end{array} & - \$ 3500 & \$ 1000 & \$ 1000 & \$ 1000 & \$ 1000 \\\hline\end{array}$$

• A) Karen, who loans a friend $3500, and whose friend pays back the loan in four annual installments of $1000
• B) Leo, who borrows $3500, and then pays back the loan in four annual payments of $1000
• C) Joe, who puts down $3500 to buy a car, and then makes annual payments of $1000
• D) Harry, who borrows $3500, and then receives an annual payment of $1000

---

Definitions:

Adoption

The legal process of taking another's child into one's family, granting it the same legal rights and status as one's biological child.

Preferred Stock

A class of stock that carries with it the right to receive payment of dividends and/or the distribution of assets on the dissolution of the corporation before other classes of stock receive their payments.

Dividends

Net profits, or surplus, set aside for shareholders.

Dissolution

A change in the relation of partners caused by any partner ceasing to be associated in the carrying on of the business.