1. Mike will loan you $3,000 for 3 years if you will pay him back $3,550 in 3 years. Larry will loan you $5,000 for 5 years if you will pay him back $6,450 in 5 years. You would chose the loan from ___ because _____.

Mike; his interest rate of 5.21% is lower than Larry's 5.55%

Larry; his interest rate of 5.77 is lower than Mike's 6.01%

Mike; his interest rate of 5.01% is lower than Larry's 5.35%

Larry; his interest rate of 5.55% is lower than Mike's 5.77%

2. Mega Corp. extends credit terms of 30 days to its customers. If its average collection period was 55 days, and cash flows were becoming a concern, management should _______

A) insist on only cash sales from this point forward

B) extend their credit terms for customers to 60 days

C) focus on contacting credit customers and getting payment D) set up and borrow on a line of credit

E) reduce overhead by laying off part of its sales force