Question

The one rate that truly represents the interest earned in a year is the annual effective yield. (or effective annual interest rate).

True

False

Market interest rates are supposed to reflect any anticipated changes in earning power as well as purchasing power in the economy.

True

False

When you pay cash for a car, you lose the opportunity to earn interest on the money you spend.

True

False

Answer 1

The one rate that truly represents the interest earned in a year is the annual effective yield. (or effective annual interest rate).

The given statement is True

Reason:

The Effective Annual Interest Rate is an important tool that allows the evaluation of the true return on an investment or true interest rate on a loan.

Market interest rates are supposed to reflect any anticipated changes in earning power as well as purchasing power in the economy.

The given statement is True

Reason:

Market interest rates reflect all anticipated changes in earning power as well as purchasing power in the economy.

When you pay cash for a car, you lose the opportunity to earn interest on the money you spend.

The given statement is True

Reason:

When we pay cash for a car , our money gets blocked and we loose the opportunity to earn interest on the money we have invested in car.

Opportunity cost is the value of something when a particular course of action is chosen. Simply put, the opportunity cost is what you must forgo in order to get something.