Q1 The loanable funds theory states that a interest rates a

Q1. The loanable funds theory states that ____________________.

a.

interest rates are a function of the supply of and demand for loanable funds

b.

interest rates are a function of the supply of savings from all sectors of the economy

c.

money supply contracts and the level of current savings dictate the current interest rates

d.

the major factor that determines the volume of savings, corporate as well as individual, is the level of national income

Q.2 Which of the following is False?

a.

Partial amortization occurs when payments exceed interest due but not by enough to reduce the amount owed to zero at maturity.

b.

Negative amortization means that the loan balance owed increases over time because payments are less than interest due.

c.

APR stands for accrued percentage rate.

d.

The accrual rate is usually the nominal rate divided by the number of periods within a year that will be used to calculate interest.

Q3. Which of the following is True?

a.

For a fully amortizing CPM loan, its loan balance is reduced only very slightly at first.

b.

Inflation makes very little difference to lenders of and investors needing money.

c.

For a fully amortizing CPM loan, its amortization is constant overtime.

d.

For a fully amortizing CPM loan, its interest payment is increasing overtime.

Solution

1 A as loanable funds inclues all forms of credit loan,bonds etc.

2 C annual percentage rate

3 A because it contains higher interest.