The Effective Rate on a $20,000 Installment Loan with Quarterly

question 24

Multiple Choice

The effective rate on a $20,000 installment loan with quarterly payments and $2,000 in interest for two years is approximately ______.

• A)16%
• B)7.4%
• C)29.5%
• D)8.9%

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Definitions:

Basic Overheads

The routine, essential expenses incurred in the operation of a business, such as rent, utilities, and salaries.

Working Capital

The difference between a company's current assets and current liabilities, indicating its short-term financial health.

Cash Outflows

Money that is spent or transferred out of a business, project, or venture.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production costs.