Zoe and Lucius Are Parties to a Contract That Allows

question 21

Multiple Choice

Zoe and Lucius are parties to a contract that allows Zoe to take the benefit of a "prepayment privilege" (as that term was used in the text) .Which of the following statements is most likely to be TRUE?

• A)The prepayment privilege indicates that Lucius borrowed money from Zoe.
• B)The prepayment privilege was intended to compensate Zoe for the loss of interest on a loan.
• C)The prepayment privilege was intended to allow Zoe to demand repayment of a loan earlier than expected if interest rates decrease.
• D)Zoe, as a mortgagor, wanted the prepayment privilege, which is the right to repay the loan early without being liable to Lucius for a "bonus," which is a penalty that a lender imposes on a borrower who tries to reduce interest payments by repaying a loan early.
• E)The prepayment privilege indicates that Zoe has agreed to sell a piece of land to Lucius and that she is entitled to receive payment even before she transfers title to him.

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Definitions:

Disposable Income

The net income available to households or individuals after accounting for taxes, which can be spent on consumption or savings.

Consumption

The use of goods and services by households, one of the primary components that determine the overall level of economic activity in an economy.

Billion

A numerical value represented as 1,000 million (1,000,000,000) in the short scale, commonly used in financial and demographic statistics.

MPS

The marginal propensity to save, which is the proportion of an additional unit of income that is saved rather than spent.