Loan Capital: Interest - SS2 Accounting Past Questions and Answers - page 1
1
What is interest in the context of loan capital?
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A
The cost of borrowing money
B
The amount of money borrowed
C
The length of time for which the money is borrowed
D
None of the above
2
What determines the interest rate charged on loan capital?
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A
The amount of money borrowed
B
The creditworthiness of the borrower
C
The term of the loan
D
All of the above
3
How does a higher interest rate affect the cost of borrowing?
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A
It increases the total cost of borrowing
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B
It decreases the total cost of borrowing
C
It has no effect on the total cost of borrowing
D
None of the above
4
Who earns a return on loan capital?
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A
The borrower
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B
The lender
C
Both the borrower and the lender
D
None of the above
5
What role does interest play in loan capital?
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A
It allows lenders to earn a return on their investment
B
It affects the overall cost of borrowing for borrowers
C
Both a and b
D
None of the above
6
What is the formula for calculating interest on loan capital?
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7
How does the creditworthiness of the borrower affect the interest rate charged on loan capital?
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