If Two Parties to a Loan Contract Agree That the Lender

question 7

Multiple Choice

If two parties to a loan contract agree that the lender should earn an 8 percent increase in purchasing power as a result of a loan,and the inflation rate is 5 percent,what is the nominal interest rate?

• A)13 percent
• B)8 percent
• C)5 percent
• D)3 percent
• E)1 percent

Understand the concept of differential cost and how it applies to business decisions.

Analyze the financial advantage (disadvantage) of discontinuing a product, service, or segment.

Understand the concept of outsourcing and make-or-buy decisions.

Analyze special orders and determine their financial implications.

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Definitions:

Checks

Written, dated, and signed instruments that direct a bank to pay a specific sum of money to the bearer or named party.

Bearer Instrument

An instrument payable to cash or to whoever is in possession of the instrument.

Commercial Paper

An unsecured, short-term debt instrument issued by corporations, typically used for the financing of accounts receivable, inventories, and meeting short-term liabilities.

Delivery

The process of transporting goods from one place to another or the act of transferring the possession of something.