Interest Rates Are the Payments Needed to Entice Individuals to

question 183

Multiple Choice

Interest rates are the payments needed to entice individuals to

• A)accept insurable risk.
• B)accept uninsurable risk.
• C)sacrifice their present consumption.
• D)sacrifice their future consumption.

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Definitions:

Annual Interest Rate

The percentage of the principal amount of a loan that is charged as interest to the borrower for one year.

Interest

The cost of borrowing money, typically expressed as an annual percentage of the loan amount.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from revenue.

Profits

The financial gain obtained when the revenue from business activities exceeds expenses, costs, and taxes.