Ambidex Is Considering a Bank Loan of $1,800,000 to Update

question 10

Multiple Choice

Ambidex is considering a bank loan of $1,800,000 to update its information system technology. It is expecting to finance the loan over five years, with annual payments, at an interest rate of 12%, compounded annually. Which of the following would provide the least cost alternative to Ambidex?

• A) Maintain the current terms.
• B) Make a down payment of 5% of the principle.
• C) Spread the payments over eight years instead of five years.
• D) Pay at the beginning, instead of at the end of the year.
• E) Make quarterly payments instead of annual ones.

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Definitions:

Bond Ratings Agencies

Organizations that assess the creditworthiness of both sovereign and corporate issuers of debt securities, providing investors with information on the risk level of their investments.

Conflicts of Interest

Situations in which a person's private interests could potentially interfere with their professional obligations or duties, leading to biased decisions.

Financial Meltdown

A severe and sudden downturn in the financial markets, often leading to a loss of asset values and financial instability.

Facilitation Payments

Small payments made to expedite or facilitate routine government actions, often seen in a gray area between legitimate fees and bribery.