Influenced by a firm's ability to make interest payments and pay back its debt, if all else is equal, creditors would prefer to give loans to companies with times-interest-earned ratios (TIE).

Question

Simeon

Business

6 July, 16:46

Influenced by a firm's ability to make interest payments and pay back its debt, if all else is equal, creditors would prefer to give loans to companies with times-interest-earned ratios (TIE).

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Answers (1)

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Joselyn · Answer 1

The correct answer is: high.

Explanation:

In economics, interest rate is the amount paid in a unit of time for each unit of capital invested. It can also be said that it is the interest of a unit of currency in a unit of time or the performance of the unit of capital in the unit of time.

Interest rates are applied in different ways, for different periods of time, so it is important that you know what type of fee they are charging you. Also if interest will be paid at the beginning or end of the loan.

The most used interest rates are the nominal interest rate and the effective or equivalent annual interest rate.

Nominal interest rate:

This rate is simple interest, and corresponds to the percentage that will be added to the initial capital as compensation for a certain period of time, which does not necessarily have to be one year.

Effective annual interest rate:

It is also known as the equivalent annual interest rate, it is a compound interest rate, including the nominal interest rate, bank charges and fees, and the term of the operation. This rate addresses the full compensation the financial entity receives for lending us the money.