Which One of the Following Statements Is Correct About a Floating

question 7

Multiple Choice

Which one of the following statements is correct about a floating interest rate loan if the interest rate is defined as "Prime plus 1 percent"? The interest rate:

• A) is set to vary at a rate equal to the prime rate plus 1 percent.
• B) can fluctuate up to a maximum of 1% above the current prime rate over the life of the loan.
• C) will be fixed at the current prime rate plus 1 percent.
• D) will vary with the prime rate but changes will only occur in 1 percent intervals.

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Definitions:

Net Investment Income

The profit from investments after deducting all related expenses, such as interest payments and fees.

Purchases of Assets

The acquisition of assets, such as property, equipment, or securities, by a company or individual as investments or for production purposes.

Inflows of Money

The movement of cash or cash equivalents into a place, organization, or financial instrument.

Positive Entry

The introduction of new firms into a market, increasing competition and potentially leading to innovation and lower prices for consumers.