James borrows $10,000 from the bank. By the time the loan is repaid, James has paid thebank $10,400. What does the additional $400 represent?A Inflation rateB Purchasing power of moneyC InterestD Investmen

James borrows $10,000 from the bank. By the time the loan is repaid, James has paid thebank $10,400. What does the additional $400 represent?A Inflation rateB Purchasing power of moneyC InterestD Investmen

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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Question

James borrows $10,000 from the bank. By the time the loan is repaid, James has paid the
bank $10,400. What does the additional $400 represent?
A Inflation rate
B Purchasing power of money
C Interest
D Investmen

Definition Definition Value of one unit of currency in terms of goods and services. Purchasing power refers to the ability of money to purchase goods and services at a particular point of time. As price levels in the economy increase, the purchasing power of one unit of currency decreases and vice versa.

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