Multiple Choice QuestionThe cost of issuing a large loan and a small loan are about the same in dollars, but the cost is Blank______.Multiple choice question.equal to the percentage of the smaller loangreater as a percentage of the smaller loansmaller as a percentage of the smaller loangreater as a percentage of the larger loan
Question
Multiple Choice QuestionThe cost of issuing a large loan and a small loan are about the same in dollars, but the cost is Blank______.Multiple choice question.equal to the percentage of the smaller loangreater as a percentage of the smaller loansmaller as a percentage of the smaller loangreater as a percentage of the larger loan
Solution
The correct answer is "greater as a percentage of the smaller loan".
Here's why:
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The cost of issuing a loan is generally fixed, meaning it doesn't change whether the loan is large or small. This could include things like the cost of processing paperwork, doing credit checks, etc.
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When you express this cost as a percentage of the loan, it becomes a larger percentage for smaller loans. This is because the same dollar amount is a larger portion of a smaller total.
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Conversely, the cost is a smaller percentage of larger loans because the same dollar amount is a smaller portion of a larger total.
So, the cost of issuing the loan is greater as a percentage of the smaller loan.
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