Interest Rates Quiz

What is the most common rate quoted by financial institutions?

• Quarterly Interest Rate

• Monthly Interest Rate

• Annual Percentage Rate (APR)

• Effective Annual Rate (EAR)

How is the Effective Annual Rate (EAR) calculated?

• APR adjusted for inflation

• Using the formula (1 + i%)^m - 1

• Using the formula (1 + r*) x (1 + h)

• APR divided by the number of compounding periods

What does the real rate of interest adjust for?

• Maturity risk

• Market volatility

• Inflation

• Default risk

Which of the following is included in the nominal risk-free rate?

• Inflation premium

• Maturity premium

• Default risk premium

• Credit risk premium

What is the formula for the Fisher Effect?

• r = APR/m

• r = (FV/PV) - 1

• (1 + r) = (1 + r*) x (1 + h)

• r = r* + h

If a loan has an APR of 9.5% compounded monthly, what is the periodic interest rate?

• 0.79167%

• 0.875%

• 0.75%

• 1.25%

What is the total interest paid on a $100,000 loan at an APR of 8.5% after one year with monthly compounding?

• $10,000.00

• $7,500.00

• $9,000.00

• $8,839.05

If a loan has an APR of 7.2% compounded quarterly, what is the periodic interest rate?

• 1.8%

• 1.5%

• 1.2%

• 2.0%