TFC (Totally Fake Company) asks their bank what the interest rate would be on a $3 million dollar line of credit (basically, a demand loan). The bank says 6.375%. Then TFC asks what the interest rate would be on a $150 million dollar line of credit, and the bank says 8.375%. Which of the following is the most likely explanation for the higher interest rate? O a. Higher inflation. O b. Higher administrative cost. O c. Lower opportunity cost. d. Lower default risk. Oe. Higher credit risk. Certainty OC=1 (Unsure: <67%) OC=2 (Mid: >67%) OC=3 ( Quite sure: >80%)
TFC (Totally Fake Company) asks their bank what the interest rate would be on a $3 million dollar line of credit (basically, a demand loan). The bank says 6.375%. Then TFC asks what the interest rate would be on a $150 million dollar line of credit, and the bank says 8.375%. Which of the following is the most likely explanation for the higher interest rate? O a. Higher inflation. O b. Higher administrative cost. O c. Lower opportunity cost. d. Lower default risk. Oe. Higher credit risk. Certainty OC=1 (Unsure: <67%) OC=2 (Mid: >67%) OC=3 ( Quite sure: >80%)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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6. the math of interest. please indicate if you are unsure or totally sure about the answer
Transcribed Image Text:TFC (Totally Fake Company) asks their bank what the interest rate would be on a $3 million dollar line of credit
(basically, a demand loan). The bank says 6.375%. Then TFC asks what the interest rate would be on a $150 million
dollar line of credit, and the bank says 8.375%. Which of the following is the most likely explanation for the
higher interest rate?
a. Higher inflation.
b. Higher administrative cost.
O c. Lower opportunity cost.
d. Lower default risk.
e. Higher credit risk.
Certainty OC=1 (Unsure: <67%) OC=2 (Mid: >67%) OC=3 ( Quite sure: >80%)
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