Your Company Is Planning to Borrow $1,000,000 on a 5-Year,15

question 76

Multiple Choice

Your company is planning to borrow $1,000,000 on a 5-year,15 percent,annual payment,fully amortized term loan.What fraction of the payment made at the end of the second year will represent repayment of principal?

• A) 29.83%
• B) 57.18%
• C) 35.02%
• D) 64.45%
• E) 72.36%

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Definitions:

Real Rate

The real rate is the interest rate adjusted for inflation, providing a more accurate measure of the true return on an investment or the true cost of borrowing.

Interest

The cost of borrowing money or the return on investment, typically expressed as a percentage of the principal.

Interest Rate

Refers to the cost of borrowing money, expressed as a percentage of the amount loaned, or the return on invested savings.

Loanable Funds

The money available for borrowing in the financial markets, determined by the saving rates of individuals and the banking sector's policies.