A Security Firm Is Offered $80 000 in One Year

question 97

Multiple Choice

A security firm is offered $80 000 in one year for providing CCTV coverage of a property. The cost of providing this coverage to the security firm is $74 000, payable now. If the security firm planned to borrow the funds from a bank, what is the maximum interest rate a bank could charge them so they at least break even on this project?

• A)8.2155%
• B)8.1081%
• C)7.5000%
• D)8.1999%

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Definitions:

Credit Policy

A set of guidelines that a company follows to determine credit terms for customers, including payment terms, credit limits, and how to manage past-due accounts.

Short-Term Credit

A type of financing or line of credit that is designed to be repaid within a short period, typically less than one year, used for immediate cash flow needs.

Credit Terms

These are the payment conditions imposed by the seller on the buyer, including payment deadline, discount for early payment, and penalty for late payment.