Which of the following can be described as direct finance?

1) Which of the following can be described as direct finance?

A) You take out a mortgage from your local bank.

B) You borrow $2500 from a friend.

C) You buy shares of common stock in the secondary market.

D) You buy shares in a mutual fund.

2) Assume that you borrow $2000 at 10% annual interest to finance a new business project. For this loan to be profitable, the minimum amount this project must generate in annual earnings is

A) $400.

B) $201.

C) $200.

D) $199.

3) You can borrow $5000 to finance a new business venture. This new venture will generate annual earnings of $251. The maximum interest rate that you would pay on the borrowed funds and still increase your income is

A) 25%.

B) 12.5%.

C) 10%.

D) 5%.