Interest Rates Answers

Mike is looking for a loan. He is willing to pay no more than an effective rate of 8.000% annually. Which, if any, of the following loans meet Mike’s criteria? Loan X: 7.815% nominal rate, compounded semiannually Loan Y: 7.724% nominal rate, compounded monthly Loan Z: 7.698% nominal rate, compounded weekly

Andrew is choosing between four loans. Loan P has a nominal rate of 10.393%, compounded daily. Loan Q has a nominal rate of 10.516%, compounded weekly. Loan R has a nominal rate of 10.676%, compounded monthly. Loan S has a nominal rate of 10.755%, compounded annually. Which loan will give Andrew the best effective interest rate?

The nominal rate on Sarah’s loan is 7.250%. If the interest is compounded monthly, what rate of interest is Sarah actually paying?

Dave is considering two loans. Loan U has a nominal interest rate of 9.97%, and Loan V has a nominal interest rate of 10.16%. If Loan U is compounded daily and Loan V is compounded quarterly, which loan will have the lower effective interest rate, and how much lower will it be?

Andrew is choosing between four loans. Loan P has a nominal rate of 10.393%, compounded daily. Loan Q has a nominal rate of 10.516%, compounded weekly. Loan R has a nominal rate of 10.676%, compounded monthly. Loan S has a nominal rate of 10.755%, compounded annually. Which loan will give Andrew the best effective interest rate?

Wyatt is paying back a loan with a nominal interest rate of 13.62%. If the interest is compounded quarterly, how much greater is Wyatt’s effective interest rate than his nominal interest rate?

Mike is looking for a loan. He is willing to pay no more than an effective rate of 8.000% annually. Which, if any, of the following loans meet Mike’s criteria? Loan X: 7.815% nominal rate, compounded semiannually Loan Y: 7.724% nominal rate, compounded monthly Loan Z: 7.698% nominal rate, compounded weekly

Which factor or factors listed below are external influences on a loan’s interest rate?I. the borrower’s credit historyII. the length of the loanIII. the federal funds rate

Why do interest rates on loans tend to be higher in a strong economy than in a weak one?

When calculating the effective rate of a loan, which statement or statements must be true if n is equal to 1?I. The nominal rate equals the effective rate.II. The length of the loan is exactly one year.III. The interest is compounded annually.

Dave is considering two loans. Loan U has a nominal interest rate of 9.97%, and Loan V has a nominal interest rate of 10.16%. If Loan U is compounded daily and Loan V is compounded quarterly, which loan will have the lower effective interest rate, and how much lower will it be?

Why do interest rates on loans tend to be higher in a strong economy than in a weak one?

Tiffany has taken out a loan with a stated interest rate of 8.145%. How much greater will Tiffany’s effective interest rate be if the interest is compounded weekly than if it is compounded semiannually?

Orlando has a loan with an effective interest rate of 7.918%, compounded annually. Which of the following must be true?I. In the effective rate formula, n is equal to one.II. The nominal rate is 7.918%.III. The Federal Funds Rate is static.