Elaine wants to buy and operate an ice-cream truck but doesn't have the financial resources to start the business. She borrows $10,000 from her friend George, to whom she promises an interest rate of 7 percent, and gets another $20,000 from her friend Jerry, to whom she promises a third of her profits. What best describes this situation?

Question

Azul Estrada

Business

26 October, 02:34

Elaine wants to buy and operate an ice-cream truck but doesn't have the financial resources to start the business. She borrows $10,000 from her friend George, to whom she promises an interest rate of 7 percent, and gets another $20,000 from her friend Jerry, to whom she promises a third of her profits. What best describes this situation?

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Answers (1)

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Wallace · Answer 1

In financial terms, Jerry is a shareholder of Elaine's ice cream business and George is a bondholder.

Explanation:

Jerry is entitled to 33.3% of Elaine's ice cream business profit, so he owns a share of the businesses profit.

Elaine has to pay George $700 in interest for the money he lent her, the $700 would be the coupon and $10,000 the bond value.