Cash flow concepts II

2. What is the difference between nominal interest rate and effective interest rate? A. Nominal interest rate is quoted based on an annual period. Effective interest rate is actual interest earned or paid in a year or some other time period. B. Nominal interest rate is actual interest earned or paid in a year or some other time period. Effective Interest rate is quoted based on an annual period. C. They are not related. D. There is no difference.

A

For 16% compounded monthly, what is the interest rate per month? a. 1.33% b. 1.35% c. 1.4% d. 1.2%

A

If you invest $200 for 1 year at 19% compounded monthly, how much interest would you earn? A. 20.7% B. 19.7% C. 18.7% D. 17.7%

A

1. If you have a nominal interest rate is 8% compounded quarterly, what is your effective annual interest rate? A. 8.24% B. 7.52% C. 8.52% D. 7.24%

A

1. What is the effective interest rate for interest based on 13.5% APR? a. 14.37% b. 12.43% c. 14.02% d. 14.00%

A

2) What is the number of interest periods per year if 14% is the interest rate per month? A) 12 B) 14 C) 13 D) 7

A

Mary is applying for a credit card, and the nominal interest rate is 5% compunded daily. What is her effective annual interest rate? a. 5.13% b. 5% c. 6.24% d. 4.75%

A

A ________ dollar is worth more than a _________ dollar. A) distant; nearby B) nearby; distant C) clean; dirty D) new; old

B

Steve deposits $2,000 in a savings account that pays 3% compounded quarterly. How much will steve have in his account after 8 years? a. $2,540.22 b. $3,270.34 c. $2,107.49 d. $1,709.89

A

Suppose your savings account pays 3% interest compounded monthly. What is the annual effective interest rate? A) 3.04% B) 3.03% C) 3.02% D) 3.01%

A

What does 16% compounded monthly mean in laymans terms with a savings account? A)You will accrue 1.25% interest per month on the sum. B) Your month will be increased by 16% each month. C) You can borrow money at a 16% interest rate. D) The Annual Percentage rate will be 1.25%.

A

Which of the following symbols is incorrectly defined regarding the Effective Interest Rate per payment period formula? A. C= total number of interest periods per year B. C= number of interest periods per payment period C. K = number of payment periods per year D. r/K = nominal interest rate per payment period

A

You invest $15,000 for one year at 15% coumpounded monthly. How much interest would you earn at the end of the year? A) $17,411.32 B) $14,712.79 C) $15,742.91 D) $16,420.69

A

1) If a savings account pays 9% interest compounded quarterly, what would be the value of i? A) 9% B) 2.25% C) 3% D) 3.6%

B

1) If your savings account pays 6% compounded monthly, how much would you have if you deposit $2100 for one year. A. $2500 B. $2122 C. $2366 D. $2107

B

1) What is the effective interest rate? A) Interest rate quoted based on an annual period B) Actual interest earned in a time period C) An interest rate that is offered strictly by investors D) An interest rate that effectively earns you money

B

If your interest rate per month is 18% compounded monthly. What is the actual interest each month you will be charged? A) 18% B) 1.5% C) 1.8 % D) 15%

B

In Effective Annual interest rate whayt is r equal to? A) Nominal intrest rate per week. B) Nominal interest rate per year. C) Effective annual interest rate. D) Number of interest periods per year.

B

Interest rate quoted based on an annual period is A. Numerical Interest Rate B. Nominal Interest Rate C. Compound Interest Rate D. Effective Interest Rate

B

Marginal _______ must exceed marginal ________. A) cost; revenue B) revenue; cost C) distance; comfort D) payments; costs

B

Which form of compounding interest are you more likely to earn? A. Compounded weekly B. Compounded annually C. Compounded monthly D. Compounded hourly

B

In the effective interest rate per payment period formula, i=[1+r/CK]^C-1, what does CK represent? A) number of interest periods per payment period B) number of payment periods per year C) total number of interest period per year, or M D) nominal interest rate per payment period

C

Suppose you invest $16 for 3 years at 14% compounded monthly. How much interest would you earn? A. $22.43 B. $26.24 C. $24.58 D. $28.17

C

The effective annual interest rate needs all the following values EXCEPT: A. Nominal interest rate per year B. Number of interest periods per year C. Nominal interest/ Actual interest D. Nominal interest rate per year/number of interest periods per year

C

Which of the following best describes the Effective Interest Rate? A. Interest Rate quoted based on an annual period B. Interest Rate that makes NPV=0 C. Actual interest earned or paid in a year or some other time period D. Interest rate that makes IRR=0

C

2) If the monthly interest rate is 12.5%, what is the Annual effective interest rate? A) 12.50% B) 12.00% C) 13.03% D) 13.24%

D

2) What is the annual effective interest rate of an interest of 17% compounded quarterly? A. 1.15% B. 1.16% C. 1.17% D. 1.18%

D

2) r/K is equal to? A) Number of interest periods per payment period B) Number of payment periods per year C) Total number of interest periods per year, or M D) Nominal interest rate per payment period

D

If your interest rate is 10% compounded quarterly, what is your effective interest rate per quarter? A)10% B) 3.33% C)2.5% D)2.25%

D

John is purchasing solar panels. He has four loan options, Loan A has a nominal rate of 6% compounded quarterly, Loan B has a nominal rate of 5.9% compounded monthly, Loan C has a nominal rate of 5.95% compounded quarterly, and Loan D has a nominal rate of 6% compounded yearly. Which Loan should John choose? a. Loan A b. Loan B c. Loan C d. Loan D

D

Johnny puts his money into a savings certificate. If he buys a $2,000 certificate at 10% annual interest rate, how many years will it take for the certificate to be worth $20,000 dollars? Chose the closest answer. a. 16 years b. 18 years c. 22 years d. 24 years

D

Suppose you have an account with a nominal interest rate of 14% compounded daily. If you deposit $14,000 for 5 years, how much would you have? (Round annual eff. int. rate to two decimal places) A) $29,183 B) $31,245 C) $28,052 D) $28,183

D

What is interest rate quoted based on an annual period known as? A. Effective interest rate B. Normal interest rate C. Flat interest rate D. Nominal interest rate

D