Suppose Paul Borrows $4,000 for One Year from His Grandfather

question 97

Multiple Choice

Suppose Paul borrows $4,000 for one year from his grandfather who charges Paul 7% interest. At the end of the year Paul will have to repay his grandfather:

• A) $4,280
• B) $4,290
• C) $4,350
• D) $4,820

---

Definitions:

Financial Lease

A type of lease in which the lessee is effectively considered to own the asset during the lease term and bears the risk of obsolescence.

Tax Avoidance

The legal practice of structuring financial affairs to minimize tax liabilities without violating the law.

CRA

The Canada Revenue Agency (CRA) is a governmental agency that administers tax laws for the Canadian federal government and for most provinces and territories.

Financing Decision

The decision-making process regarding the best way to acquire necessary funds to invest in long-term assets.