You Borrow $10,000 from a Bank for One Year at a Nominal

question 204

Multiple Choice

You borrow $10,000 from a bank for one year at a nominal interest rate of 5%.The CPI over that year rises from 180 to 200.What is the real interest rate you are paying?

• A)15%
• B)5%
• C)-1.1%
• D)-6.1%

Understand the relationship between total revenue, total profit, and output levels.

Recognize the impact of market entry and exit on industry prices and profits in the long run.

Differentiate between accounting profit and economic profit.

Describe the characteristics of a perfectly competitive market.

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Definitions:

Average Payments

The mean amount paid over a defined period payments.

Average Daily Float

The average amount of uncollected funds represented in checks or other negotiable instruments over a specified period.

Lockbox System

A service provided by banks to accelerate collection of payments by having those payments sent to a special post office box rather than to the company.

Treasury Bills

Represent short-term government securities issued at a discount from the par value and mature without interest payments.