Suppose That You Borrow $10,000 for One Year, and at the End

question 135

Multiple Choice

Suppose that you borrow $10,000 for one year, and at the end of the year, you must repay $10,450. The interest rate is

• A) 14.5 percent.
• B) 8.0 percent.
• C) 4.5 percent.
• D) 2.7 percent.

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Definitions:

Inventory Turnover

A measure of how quickly a company sells its stock of goods in a period, calculated by dividing the cost of goods sold by the average inventory level.

Equity Multiplier

A financial leverage ratio that measures the portion of a company's assets that are financed by shareholders' equity.

Debt-to-equity Ratio

The ratio that demonstrates the comparative financing from shareholders' equity and debt for a company's assets.

Times Interest Earned Ratio

The Times Interest Earned Ratio measures a company's ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.