Matt's Machine Company Has Borrowed $10 Million for Four Months

question 104

Multiple Choice

Matt's Machine Company has borrowed $10 million for four months at 5.5% APR compounded monthly, using inventory stored in a field warehouse as collateral. The warehouse fee is 0.5%, payable at the beginning of the loan. What is Matt's EAR?

• A) 5.5%
• B) 7.24%
• C) 0.58%
• D) 7.01%

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Definitions:

Recovery Stage

A phase in the economic cycle or in the lifecycle of a project where performance begins to improve after a period of decline or recession.

Business Spending

The expenditure by businesses on goods and services, including capital goods and labor.

Consumer Spending

The total amount of money spent by consumers on goods and services within an economy.

Recession

Cyclical economic contraction that lasts for six months or longer.