The Total Cost of Granting Credit Has Two Components

question 84

Multiple Choice

The total cost of granting credit has two components. ________ are the costs of lost sales incurred when credit is not granted and are inversely related to the amount of credit extended. ________
Are the cash flows that are incurred when credit is granted and are positively related to the amount
Of credit extended.

• A) Stockout costs; Opportunity costs.
• B) Carrying costs; Opportunity costs.
• C) Opportunity costs; Interest costs.
• D) Opportunity costs; Carrying costs.
• E) Sales costs; Carrying costs.

---

Definitions:

Low Down-payment Loans

Loan types that require a smaller initial payment from the borrower, often used in the context of home mortgages.

Interest Rate Policy

A component of monetary policy, often set by a central bank, that determines the level of interest rates to influence economic activity.

Federal Regulations

Rules set by the federal government to control and guide the practices of businesses, individuals, and other organizations within the country.

Mortgage Lending Standards

Criteria used by banks and financial institutions to determine the eligibility of borrowers for a mortgage.