Zane's Vanes Is a Service That Restores Old Weather Vanes

question 14

Multiple Choice

Zane's Vanes is a service that restores old weather vanes.Zane has just spent $125 purchasing a 1920s-era weather vane which he expects to restore and sell for $500 once the work is completed.After having spent $125,Zane realizes that he will need to spend an additional $200 on materials to complete the restoration.Alternatively,he can sell the weather vane without restoring it for $200.What should he do?

• A)He should sell the weather vane now to make the most profit.
• B)It does not matter what he does; he is going to take a loss on the project.
• C)He should finish the restoration and then sell the weather vane.
• D)He should sell the weather vane back to the party he purchased it from and cut his losses.

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Definitions:

Effective Rate

The actual interest rate on an investment or loan, taking into account the effect of compounding over a given period of time.

Effective Annual Rate

It is the interest rate that is adjusted for compounding over a given period. Essentially, it represents the actual annual return on an investment or the actual cost of borrowing.

Per Month

A recurring period or frequency, indicating that an action or event occurs or is calculated on a monthly basis.

Effective Rate

The actual interest rate an investor earns or pays on an investment or loan, taking into account the compounding of interest.