Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

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Multiple Choice

The interest rate a company pays on 1-year, 5-year, and 10-year loans is primarily a function of which of the following?

The number of employees in the company

The company's inventory turnover ratio

The term or maturity of the loan

The company's advertising expenses

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Verified step by step guidance

Understand the question: The problem is asking about the primary factor that determines the interest rate a company pays on loans of different durations (1-year, 5-year, and 10-year).

Recognize the concept: The interest rate on loans is influenced by the term or maturity of the loan. This is because longer-term loans typically carry higher risks for lenders, such as inflation risk and credit risk, which leads to higher interest rates.

Eliminate irrelevant options: The number of employees, inventory turnover ratio, and advertising expenses are not directly related to the determination of interest rates on loans. These factors may influence other aspects of a company's financial health but are not primary determinants of loan interest rates.

Focus on the correct factor: The term or maturity of the loan is the key determinant because it reflects the time horizon over which the loan will be repaid. Longer maturities generally result in higher interest rates due to the increased uncertainty and risk over time.

Conclude: The correct answer is 'The term or maturity of the loan,' as it directly impacts the interest rate structure for loans of different durations.