In determining the cost of bank financing, which is the most important factor?
A) The prime rate
B) The nominal rate
C) The effective rate
D) The discount rate

Question

Quizplus · Accepted Answer

The effective rate is the most important factor in determining the cost of bank financing because it represents the total cost of borrowing including both the interest rate and any fees associated with the loan. The nominal rate only represents the interest rate and does not include fees. The prime rate and discount rate can be used as benchmarks for interest rates, but they do not take into account the specific terms of the loan.

In Determining the Cost of Bank Financing, Which Is the Most