If You Could Borrow at 9

question 8

Multiple Choice

If you could borrow at 9.5% compounded semi-annually or at 9.4% compounded monthly,which would you prefer?

• A) 9.5% compounded semi-annually
• B) Indifferent
• C) 9.4% compounded monthly

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Definitions:

Net Cash Flows

The difference between a company's cash inflows and outflows over a specific period.

Accounting Rate

Typically refers to the rate of return or interest rate used in financial calculations, such as net present value or internal rate of return.

Straight-Line Method

A method of calculating depreciation of an asset, which involves evenly spreading the cost of the asset over its useful life.

Annual Average Investment

The average amount invested over a certain period, typically calculated for evaluating investment performance.