In Order to Open Up Your New Business You Need

question 100

Multiple Choice

In order to open up your new business you need to take out a loan.First Bank charges 6% compounded quarterly,and Second Bank charges 6.5% compounded semi-annually.From which bank would you prefer to obtain your loan?

• A) First Bank
• B) Second Bank
• C) Indifferent

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Definitions:

Equity Financed

Refers to the method of raising capital for a business by selling ownership shares in the company, as opposed to incurring debt.

Coupon Rate

The annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity.

Equity Financed

The method of funding a business through selling shares of the company to investors, thus raising capital without incurring debt.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements, often used in calculating the weighted average cost of capital.