Matt's Machine Company Has Borrowed $10 Million for Four Months

question 30

Multiple Choice

Matt's Machine Company has borrowed $10 million for four months at 5.5% APR,using inventory stored in a field warehouse as collateral.The warehouse fee is 0.5%,payable at the end of the loan.What is Matt's EAR?

• A)5.5%
• B)7.20%
• C)0.58%
• D)7.01%
• E)3.46%

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Definitions:

Standard Deviation

An index indicating the amount by which individuals within a data set tend to deviate from the average or mean value.

Normal Model

A statistical model that describes data that clusters around a mean in a symmetrical, bell-shaped distribution.

Mean

The average value calculated by adding all numbers in a dataset and dividing by the count of numbers.

Standard Deviation

It quantifies the diversity or spread among a set of numerical values, showing how much they deviate from the average value.