Use the Following to Answer Questions

question 155

Multiple Choice

Use the following to answer questions :
Scenario: Betty's Cookie Shop
Betty runs a cookie shop where she sells cookies for $1 each.She employs five people,each of whom worked a total of 500 hours last year;she paid them $10 per hour.Her costs of equipment and raw materials add up to $75 000.Her business ability is legendary,and other companies have offered to pay Betty $100 000 to come to work for them.She also knows she could sell her cookie shop for $150 000.The bank in town pays an annual interest rate of 3% on all funds deposited with it.
-(Scenario: Betty's Cookie Shop) Use Scenario: Betty's Cookie Shop.Betty's explicit costs are equal to:

• A) $100 000.
• B) $80 000.
• C) $250 000.
• D) $264 000.

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Definitions:

Annual Interest Rate

The percentage of principal that is paid as interest to the lender annually, not accounting for the compound interest within that year.

Maturity Value

The final amount payable at the end of a financial instrument's term, including the principal and accumulated interest.

Commercial Paper

Promissory notes issued by large corporations to borrow funds for a short term.

Discount Rate

The interest rate charged to commercial banks and other financial institutions for the loans they take from a country's central bank or Federal Reserve.