Would It Be Worth It to Incur a Compensating Balance

question 53

Multiple Choice

Would it be worth it to incur a compensating balance of $2,000 in order to get a 1.5-percent-lower interest rate on a 1-year, pure discount loan of $100,000?

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

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Definitions:

Profit-Maximizing

The process or strategy of increasing the profit of an entity to its highest possible level under prevailing circumstances.

Nondiscriminating Monopolist

A monopolist who charges all consumers the same price for its product regardless of the consumer's willingness or ability to pay more.

Price Discriminate

The strategy of selling the same product to different customers at different prices based on what the seller believes each customer is willing to pay.

Marginal Revenue Curve

A graphical representation that shows how marginal revenue varies as output level changes, typically downward sloping for firms in competitive markets.