What is the annual compounded interest rate of an investment with a stated interest rate of 6% compounded quarterly for seven years (round to the nearest .1%)?
A) 51.7%
B) 6.7%
C) 10.9%
D) 6.1%
Which of the following provides the greatest annual interest?
A) 10% compounded annually
B) 9.5% compounded monthly
C) 9% compounded quarterly
D) 8.5% compounded daily
The effective annual rate increases when the ________ increases.
A) number of compounding periods in a year
B) number of years invested
C) quoted rate
D) both A and C
E) all of the above
You are considering two investments. Investment A yields 10% compounded quarterly. Investment B yields r% compounded semiannually. Both investments have equal annual yields. Find r.
A) 19.875%
B) 10%
C) 10.38%
D) 10.125%
The annual percentage rate (APR) is calculated as which of the following?
A) Interest rate per period x compounding periods per year
B) (1+quoted annual rate/compounding periods per year)compounding periods per year-1
C) Interest rate per period / compounding periods per year
D) 1+quoted annual rate/compounding periods per year)1/compounding periods per year-1
For any number of compounding periods per year greater than 1, EAR will always be greater than the APR.
Answer: TRUE
As the number of compounding periods per year increase, the annual percentage rate of interest increases.
Answer: FALSE
A monthly credit card interest rate of 1.5% is equal to and effective annual rate of 19.56%
Answer: TRUE
The annual percentage rate on two different investments will equal the effective annual rate on the two investments only if interest on both investments is compounded annually.
Answer: TRUE
