Homework Answers
The answer is
b. The higher the effective annual interest rate
Effective annual interest rate = (1+Nominal rate/Number of compounding periods)^Number of compounding periods - 1
Hence, more the number of compounding periods, higher will be the effective annual interest rate
APR i.e. annual percentage rate = Nominal rate
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Other things being equal, the more frequent the compounding period, the: Select one: O a. higher...
Which of the following is NOT correct? Multiple Choice Other things being equal, the more frequent...
Which of the following is NOT correct? Multiple Choice Other things being equal, the more frequent the compouding period, the higher the APR. 0 The arguement that 900 dollars today worth more than 900 dollars one year from now is correct only when interest rate is positive. 0 Cash flows occuring in different periods should not be compared unless the flows have been discounted to a common date. 0 Other things being equal, the more frequent the compouding period, the...
if two loans have the same nominal rate but different compounding frequencies, then: a. the effective...
if two loans have the same nominal rate but different compounding frequencies, then: a. the effective rate will have a compounding frequency equal to the frequency of the nominal rate. b. the loan which charges interest more frequently must have the higher effective rate. c. the loans will have the same effective annual rates. d. the effective rate will be lower than the nominal rate for both loans. e. the loan with more frequent compounding will have a lower effective...
show all work compounding effect will result in a higher future value with more frequent compounding...
show all work
compounding effect will result in a higher future value with more frequent compounding 9. (a) Assume that you have borrowed $1,000 for 2 years and you have an annual interest rate of 12% (annually compounded). What is the monthly payment due on the loan? (1 point) (b) Switch gears here and now assume that the payments are made annually. What is the annual interest expense for the borrower, and the annual interest income for the lender, during...
23. An ordinary annuity is best defined as: A) increasing payments paid for a definitive period o...
23. An ordinary annuity is best defined as: A) increasing payments paid for a definitive period of time. B) increasing payments paid forever C) equal payments paid at the end of regular intervals over a stated time period. D) equal payments paid at the beginning of regular intervals for a limited time period. E) equal payments that occur at set intervals for an unlimited period of time 24. A perpetuity is defined as: A) a limited number of equal payments...
The law of supply indicates that, other things equal, Select one: O a. producers will offer...
The law of supply indicates that, other things equal, Select one: O a. producers will offer more of a product at low prices than at high prices. b. the product supply curve is downsloping, c. consumers will purchase less of a good at high prices than at low prices. d. producers will offer more of a product at high prices than at low prices.
7) A bank offers a credit card with an APR of 18 percent, with quaterly compounding....
7) A bank offers a credit card with an APR of 18 percent, with quaterly compounding. What is the effective annual rate (EAR)? 8)Which of the following investments will attain the highest future value? a) $1,300 invested at an annual interest rate of 6% for 12 years b) $1,500 invested at an interest rate of 4.75% (monthly compounding) for 10 years c) $1,300 invested at an interest rate of 3.25% (quaterly compunding) for 10 years 9)All other things held equal,...
1) For Nominal Interest Rate expression select one of the following: A. Interest period≥ Compounding period...
1) For Nominal Interest Rate expression select one of the following: A. Interest period≥ Compounding period B. Interest period = Compounding period C. Interest period < Compounding period D. Compounding period≥ Interest period. 2)If the nominal interest rate is 10% per year compounded weekly, then what is “z% per half year compounded weekly”? A. 10% B. 2% C. 5% D. 6%
11. Nonannual compounding period Aa Aa The number of compounding periods in one year is called...
11. Nonannual compounding period Aa Aa The number of compounding periods in one year is called compounding frequency. The compounding frequency affects both the present and future values of cash flows. An investor can invest money with a particular bank and earn a stated interest rate of 13.20%; however, interest will be compounded quarterly. What are the nominal, periodic, and effective interest rates for this investment opportunity? Interest Rates Nominal rate Periodic rate Effective annual rate 13.20% 3.30% 3.66% Rahul...
The more frequent the compounding the.... lesser the future value greater the amount deposited greater the...
The more frequent the compounding the.... lesser the future value greater the amount deposited greater the present value greater the effective interest rate
The annual percentage yield (APY) for a savings account with a monthly compounding period is O...
The annual percentage yield (APY) for a savings account with a monthly compounding period is O not related to the nominal interest rate. O always lower than the nominal interest rate. 0 the same as the nominal interest rate. O always higher than the nominal interest rate.
Which of the following is NOT correct? Multiple Choice Other things being equal, the more frequent the compouding period, the higher the APR. 0 The arguement that 900 dollars today worth more than 900 dollars one year from now is correct only when interest rate is positive. 0 Cash flows occuring in different periods should not be compared unless the flows have been discounted to a common date. 0 Other things being equal, the more frequent the compouding period, the...
show all work
compounding effect will result in a higher future value with more frequent compounding 9. (a) Assume that you have borrowed $1,000 for 2 years and you have an annual interest rate of 12% (annually compounded). What is the monthly payment due on the loan? (1 point) (b) Switch gears here and now assume that the payments are made annually. What is the annual interest expense for the borrower, and the annual interest income for the lender, during...
23. An ordinary annuity is best defined as: A) increasing payments paid for a definitive period of time. B) increasing payments paid forever C) equal payments paid at the end of regular intervals over a stated time period. D) equal payments paid at the beginning of regular intervals for a limited time period. E) equal payments that occur at set intervals for an unlimited period of time 24. A perpetuity is defined as: A) a limited number of equal payments...
The law of supply indicates that, other things equal, Select one: O a. producers will offer more of a product at low prices than at high prices. b. the product supply curve is downsloping, c. consumers will purchase less of a good at high prices than at low prices. d. producers will offer more of a product at high prices than at low prices.
11. Nonannual compounding period Aa Aa The number of compounding periods in one year is called compounding frequency. The compounding frequency affects both the present and future values of cash flows. An investor can invest money with a particular bank and earn a stated interest rate of 13.20%; however, interest will be compounded quarterly. What are the nominal, periodic, and effective interest rates for this investment opportunity? Interest Rates Nominal rate Periodic rate Effective annual rate 13.20% 3.30% 3.66% Rahul...
The annual percentage yield (APY) for a savings account with a monthly compounding period is O not related to the nominal interest rate. O always lower than the nominal interest rate. 0 the same as the nominal interest rate. O always higher than the nominal interest rate.
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