Author Question: Suppose that over the life of the loan, the total interest expense for a monthly loan is 17,000, ... (Read 109 times)

newbem

  • Hero Member
  • *****
  • Posts: 579
Suppose that over the life of the loan, the total interest expense for a monthly loan is 17,000, while the total interest payment for an annual loan is 19,000. Which of the below statements is FALSE?
 
  A) The difference reflects the reduction of the principal each month versus the annual reduction of the principal.
  B) The more frequent the payment, the lower the total interest expense over the life of the loan, even though the effective rate of the loan is higher.
  C) Reducing principal at a slower pace reduces the overall interest paid on a loan.
  D) Reducing principal at a slower pace increases the overall interest paid on a loan.

Question 2

All of the following are likely to increase the cost of a company's short-term financing EXCEPT
 
  A) an increase in the company's debt rating by Moody's or Standard and Poors.
  B) an increase in the compensating balance required.
  C) taking a loan on a discount basis.
  D) an increase in the bank's prime lending rate.


ergserg

  • Sr. Member
  • ****
  • Posts: 338
Answer to Question 1

Answer: C
Explanation: C) Reducing principal at a FASTER pace reduces the overall interest paid on a loan.

Answer to Question 2

A



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

People often find it difficult to accept the idea that bacteria can be beneficial and improve health. Lactic acid bacteria are good, and when eaten, these bacteria improve health and increase longevity. These bacteria included in foods such as yogurt.

Did you know?

Cyanide works by making the human body unable to use oxygen.

Did you know?

There are more nerve cells in one human brain than there are stars in the Milky Way.

Did you know?

Stevens-Johnson syndrome and Toxic Epidermal Necrolysis syndrome are life-threatening reactions that can result in death. Complications include permanent blindness, dry-eye syndrome, lung damage, photophobia, asthma, chronic obstructive pulmonary disease, permanent loss of nail beds, scarring of mucous membranes, arthritis, and chronic fatigue syndrome. Many patients' pores scar shut, causing them to retain heat.

Did you know?

Symptoms of kidney problems include a loss of appetite, back pain (which may be sudden and intense), chills, abdominal pain, fluid retention, nausea, the urge to urinate, vomiting, and fever.

For a complete list of videos, visit our video library