Question Details

Suppose a bank offers to lend you $10,000 for 1 year on a loan 



1.	Suppose Community Bank offers to lend you $10,000 for one year at a nominal annual rate of 8.00%, but you must make interest payments at the end of each quarter and then pay off the $10,000 principal amount at the end of the year.  What is the effective annual rate on the loan?

a.	8.24%
b.	8.45%
c.	8.66%
d.	8.88%
e.	9.10%
	
2.	Suppose a bank offers to lend you $10,000 for 1 year on a loan contract that calls for you to make interest payments of $250.00 at the end of each quarter and then pay off the principal amount at the end of the year.  What is the effective annual rate on the loan?

a.	8.46%
b.	8.90%
c.	9.37%
d.	9.86%
e.	10.38%
	
3.	Charter Bank pays a 4.50% nominal rate on deposits, with monthly compounding.  What effective annual rate (EFF%) does the bank pay?

a.	3.72%
b.	4.13%
c.	4.59%
d.	5.05%
e.	5.56%
	
4.	Suppose your credit card issuer states that it charges a 15.00% nominal annual rate, but you must make monthly payments, which amounts to monthly compounding. What is the effective annual rate?

a.	15.27%
b.	16.08%
c.	16.88%
d.	17.72%
e.	18.61%
	5.	Pace Co. borrowed $20,000 at a rate of 7.25%, simple interest, with interest paid at the end of each month.  The bank uses a 360-day year.  How much interest would Pace have to pay in a 30-day month?

a.	$120.83
b.	$126.88
c.	$133.22
d.	$139.88
e.	$146.87



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