Your Company Is Able to Arrange Financing at Either a Rate

question 113

Multiple Choice

Your company is able to arrange financing at either a rate of 12.75% annually,or at a rate of 12% compounded monthly.Assuming financing is needed for one year,which rate is the best?

• A)12% compounded monthly,because the annual percentage yield is 12.68%
• B)Both rates are effectively the same,so your company should be indifferent between the two.
• C)112.75% annually because the annual percentage yield for 12% compounded monthly is greater than 12.75%.
• D)12.75% annually,because even though the annual percentage yield is higher,interest if paid only once per year at year end.

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Definitions:

Understanding

The ability to grasp the meaning, significance, or nature of something, including situations, information, or concepts.

Disability

A condition that limits a person's movements, senses, or activities, and may impact their full participation in society.

Morally

Pertaining to principles of right and wrong in behavior; ethically.

Asch

Asch is most likely a reference to Solomon Asch, a psychologist known for his research on conformity, demonstrating how group pressure can influence an individual to conform.