Would It Be Worth It to Incur a Compensating Balance

question 129

Multiple Choice

Would it be worth it to incur a compensating balance of $10,000 in order to get a 1-percent-lower interest rate on a 1-year, pure discount loan of $500,000?

• A) Yes
• B) No
• C) Not enough information is given to know

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Definitions:

Marginal Utility

The extra pleasure a customer receives from using an additional unit of a product or service.

Consumer Surplus

The discrepancy between the amount consumers are prepared to pay for a product or service and the actual price they pay.

Utility

A measure of satisfaction, usefulness or value that a consumer receives from any good or service.

Utility

In economics, the total satisfaction received from consuming a good or service.