Tillyard Inc

question 17

Multiple Choice

Tillyard Inc.requires a $25,000 1-year loan.The bank offers to make the loan, and it offers you three choices: (1) 15 percent simple interest, annual compounding; (2) 13 percent nominal interest, daily compounding (360-day year) ; (3) 9 percent add-on interest, 12 end-of-month payments.The first two loans would require a single payment at the end of the year, the third would require 12 equal monthly payments beginning at the end of the first month.What is the difference between the highest and lowest effective annual rates?

• A) 1.12%
• B) 2.48%
• C) 3.60%
• D) 4.25%
• E) 5.00%

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Definitions:

Diseconomies of Scale

The phenomenon where production costs per unit increase as a firm's or industry's output expands.

Factor Suitability

A principle in economics that factors of production such as land, labor, and capital are more productive when appropriately matched with their specific uses or industries.

Law of Diminishing Returns

The Law of Diminishing Returns is an economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain constant.

Worker Safety

Regulations and practices designed to protect employees from hazards and risks associated with their work environment.