Which of the Following Is the Correct Formula to Calculate

question 76

Multiple Choice

Which of the following is the correct formula to calculate the after-tax cost of a home equity loan?

• A)After-tax cost of a home equity loan = before-tax cost (1 + marginal tax rate)
• B)After-tax cost of a home equity loan = before-tax cost (1 - marginal tax rate)

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Definitions:

Net Working Capital

The variance between an organization's immediate assets and its short-term liabilities, showcasing its financial stability in the short run.

Revolving Credit

A credit line where the customer can borrow up to a set limit, pay back, and then borrow again, offering flexibility in borrowing and repayment.

Financing Charge

An additional fee charged by a lender to a borrower for the use of borrowed funds, often expressed as an annual percentage rate.

Compensating Balance

A minimum account balance that a company agrees to maintain in a bank account to offset the cost of banking services provided.