The Owner of a Firm Signs a Binding One-Year Lease

question 57

Multiple Choice

The owner of a firm signs a binding one-year lease on a factory for $10,000 rent a month and pays the first month's rent. The $10,000 rent is

• A)a fixed cost but not a sunk cost.
• B)a sunk cost but not a fixed cost.
• C)both a fixed cost and a sunk cost.
• D)neither a fixed cost nor a sunk cost.

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Definitions:

Maturity Value

The total amount payable to an investor at the end of a fixed-term investment, including principal and interest.

360-Day Year

A conventional method in finance for simplifying interest calculations, assuming a year has 360 days.

Finance Company

A business that provides loans to individuals and companies, aside from traditional banking institutions, often specializing in certain types of loans.

Discounted

refers to a price that has been reduced from the original or list price, often to encourage sales or clear inventory.