Fredrick Received a $1,400 Loan from the Bank for a New

question 52

Multiple Choice

Fredrick received a $1,400 loan from the bank for a new appliance. The bank is using the simple interest formula for this two-year, 8% loan. What is his total interest?

• A) $16
• B) $80
• C) $112
• D) $224
• E) $1,416

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Definitions:

EBIT

The measure known as Earnings Before Interest and Taxes determines a company's profit levels by excluding interest and tax-related expenses.

Financial Leverage

The use of borrowed funds with the intent to increase the return on equity.

EBIT-EPS Lines

Graphical representations that show the impact of financing choices, especially debt and equity, on a company's earnings per share (EPS) for various levels of earnings before interest and taxes (EBIT).

EPS

Earnings per share; a measure of a company's profitability calculated by dividing its net income by the number of outstanding shares.