What Must the Rate Be Less Than to Be Worth

question 132

Multiple Choice

What must the rate be less than to be worth it to incur a compensating balance of $2,000 in order to get a 2 percent lower interest rate on a one-year, pure discount loan of $50,000?

• A) The rate must be less than 48 percent.
• B) The rate must be greater than 48 percent.
• C) The rate must be greater than −48 percent.
• D) The rate must be less than −48 percent.

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Definitions:

Resources and Capabilities

The tangible and intangible assets that a firm utilizes to develop, manufacture, and deliver products or services to its customers.

Sustainable Advantage

An enduring benefit or competitive edge that a company can maintain over its competitors, often through innovation or strategic resource management.

Supplier Power

The ability of providers of goods or services to drive up prices and dictate terms because of their importance or scarcity.

Critical Inputs

Essential resources or factors required in the production process or for the delivery of a service that significantly impact the quality and output of the final product.