1Five different lenders quote you an annual percentage rate

1.Five different lenders quote you an annual percentage rate of 5 percent on a car loan, but each lender compounds interest on a different period/frequency. Which one of the following compounding periods provides the lowest effective annual interest rate?

Daily.

Monthly.

Annual.

Continuous.

Semi-annual.

2. Tom and Sally are the only two dealers in Widget Inc. stock. They buy and sell the stock for their own inventories, and you may phone them if you need to buy or sell the stock.  This is an example of a(n) ______ market.

Regional.

Auction.

Over-the-counter.

Exchange.

Private.

3. Todd\'s trust fund pays $500 a month for the next 30 years. The current value of these payments is called:

Future value.

Compounded value.

Present value.

Simple amount.

Single amount.

Solution

1.

Correct option is > Annual

Annual compounding will save demand for lower effective annual interest rate.

2.

2. Tom and Sally are the only two dealers in Widget Inc. stock. They buy and sell the stock for their own inventories, and you may phone them if you need to buy or sell the stock. This is an example of a(n) Over-the-counter market.

3.

Todd\'s trust fund pays $500 a month for the next 30 years. The current value of these payments is called:

Correct option is > Present value