CFA Practice Question

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CFA Practice Question

Ashley Corporation constructed an office building for its own use. During 2015, the average accumulated expenditure for construction was $4,000,000. At the end of 2010, Ashley had borrowed $1,000,000 specifically for the construction costs. The interest on the construction loan was 11%. The only other debt was $10,000,000 debentures (outstanding all of 2015), with an interest rate of 8%. How much is the total interest to be paid in 2015?

A. $110,000
B. $800,000
C. $910,000
Correct Answer: C

Total interest = ($10,000,000 x .08) + ($1,000,000 x .11) = $800,000 + $110,000 = $910,000

User Contributed Comments 10

User Comment
uberstyle note total interest, not interest attributable to construction
kutta2102 Darn nearly tricked me!
viannie it's how much we need to pay for interest ... not how much interests is attributed to the construction ;(
rfvo has nothing to do with capitalization
Paulvw There I was thinking of uncapitalized interest... <:(
arudkov TOTAL(( they got me.
investoprenuer What's this question trying to teach?
safash teaching us to be alert
johntan1979 A little off topic, I would say, this question. Perhaps something more beneficial and related to the current topic would be nice.
robertdole The questions are formulaic. Identifying the subject (interest) and trigger (paid in 2011) makes breaking them down more palpable.
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