When an enterprise borrows money from a lender, what must they usually pay back in addition to the borrowed amount?

• A. Taxes
• B. Dividend yield
• C. Interest
• D. Fees for services

Answer: (C)

When an enterprise borrows money from a lender, they are typically required to pay back the principal amount borrowed, plus interest. Interest is the cost of borrowing and represents the lender's compensation for the risk taken and the opportunity cost of lent funds. This interest is calculated as a percentage of the borrowed amount and is paid periodically, in addition to repaying the original loan amount, known as the principal.

In most lending agreements, the interest rate and the payment schedule are specified upfront, making it clear how much extra the borrower will need to pay back alongside the principal. Interest ensures that lenders are incentivized to provide loans and covers their potential risks involved in lending money.