John is able to take out a loan for $1,000 for one year at an annual interest rate of 10 percent.After calculating his rate of return to be $200,John:
A)will make money on net,and should take out the loan.
B)will make money on net,and should not take out the loan.
C)will not make money on net,and should take out the loan.
D)will not make money on net,and should not take out the loan.

Question

Quizplus · Accepted Answer

John's rate of return is $200, which is 20% of the loan amount ($1,000 x 0.10 = $100 interest for one year). Therefore, he will make a profit of $200 - $100 = $100 on the loan.

So, by taking out the loan, John will make money on net. Therefore, A) is the correct choice.

John Is Able to Take Out a Loan for $1,000