Scenario 13-4 Suppose That Abdul Opens a Coffee Shop. He Receives a Receives

question 195

Multiple Choice

Scenario 13-4
Suppose that Abdul opens a coffee shop. He receives a loan from a bank for $100,000. He withdraws $50,000 from his personal savings account. The interest rate on the loan is 8%, and the interest rate on his savings account is 2%.
-Refer to Scenario 13-4. Abdul's explicit cost of capital is

• A) $8,000.
• B) $4,000.
• C) $2,000.
• D) $1,000.

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Definitions:

Ponzi Scheme

A fraudulent investment scam promising high rates of return with little risk to investors, which generates returns for earlier investors with money taken from later investors.

Investment Swindle

A fraudulent scheme designed to deceive investors, leading to financial loss.

Extortion

The act of obtaining something, especially money, through threats or use of force.

Blackmail

The act of demanding payment or another benefit from someone in return for not revealing compromising or damaging information about them.