Pipeline Pharmaceuticals Has a One-Year $2 Million Line of Credit

question 80

Multiple Choice

Pipeline Pharmaceuticals has a one-year $2 million line of credit at an interest rate of 5% (EAR) .The loan has a loan origination fee of 2%.What is the actual interest rate paid?

• A)7%
• B)7.14%
• C)5%
• D)7.1%
• E)5.9%

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Definitions:

Flat Fee

A fixed charge for a service, regardless of usage or time consumed.

Laspeyres Price Index

A price index calculated by taking the ratio of the total cost of purchasing a set of goods at current prices to the cost of purchasing the same set of goods at base period prices.

Consumptions

The act of using goods and services to satisfy wants and needs, including everything from essentials like food and clothing to luxury items.

Base Year

A reference year used in economic indices and statistical analyses to facilitate the comparison of data over time.