With a Floating-Rate Note, the Interest Rate on the Note

question 31

Multiple Choice

With a floating-rate note, the interest rate on the note changes ________.

• A) when the risk level of the borrower changes
• B) when the prime rate changes
• C) when the demand for loans changes
• D) when bank profits changes

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Definitions:

Simple Rate Of Return

A straightforward method of calculating the return on investment by dividing annual incremental net operating income by the initial investment cost.

Cash Operating Costs

Direct costs associated with the day-to-day operations of a business, paid out in cash, including labor, materials, and overhead.

Automating

Refers to the use of technology to perform tasks with minimal human intervention, typically to improve efficiency and reduce costs.

Payback Period

The amount of time it takes for an investment to generate an amount of income or cash flow equal to the cost of the investment.