40 14% D Tue 2:00 ACI a C Secure https://bbhosted.cuny.edu/webapps/assessment/ta

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40 14% D Tue 2:00 ACI a C Secure https://bbhosted.cuny.edu/webapps/assessment/take/launch.jsp?course assessment jid- 1&course jid 1612460. QUESTION 7 In a recent Farming Times article, a new online lending platfo MicroGrain was reviewed. T and operating costs are half of traditional microfinance companies, because we are not dependent on banks for capital and do not have a brick and mortar structure.." MicroGrain lends money to rural entrepreneurs at interest rates ranging between 10 per cent and 15 per cent as compared to traditional microfinance rates of 24 per cent to 36 per cent. Repayment rate among borrowers is 96% and increasing over time. Using the break even R formula we discussed in class, how can you explain the lower rates charged by MicroGrain compared to other organizations? he founder and CEO commented, "...our capital k gross cost of bank q percentage of safe borrower R bank rate p probability of obtaining revenue (O

Explanation / Answer

Ans: Option b is the correct answer, as it is specifically mentioned by CEO that the do not take capital from banks , so debt cost is Nil and also no brick and mortar sysytem. Capital investment is very low make it cost efficient as capital is large part of cost to the company.

Also R is directly proportion to k So, as k is lower, henceR too is lower.

Option a is incorrect as R is lower and not higher, option c is incorrect as k is lower and not higher

option d is incorrect as q is higher and not on lower side to make R low

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