A Firm Has a Line of Credit and Borrows $25,000

question 126

Multiple Choice

A firm has a line of credit and borrows $25,000 at 9 percent interest for 180 days or half a year. What is the effective rate of interest on this loan if the interest is paid in advance?

• A) 4.7 percent
• B) 9.4 percent
• C) 9.9 percent
• D) 10.3 percent

---

Definitions:

Loan

Borrowed money that is expected to be paid back with interest.

Variable Cost

Expenses that vary directly with production output.

Mud Statues

Sculptures made from mud or clay, often created as artistic or cultural items.

Loan

A borrowed amount of funds that needs to be returned along with additional interest charges.