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
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.
Why do interest rates on loans tend to be higher in a strong economy than in a weak one?
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.
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
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?
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?
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?
Did you find these answers helpful?