Which of the following describes the most common bank loan? A. The bank loan is compounded...

Which of the following describes the most common bank loan?

A. The bank loan is compounded monthly and quoted to the lender using the monthly periodic rate.

B. The bank loan is compounded annually and quoted to the lender using the monthly periodic rate.

C. The bank loan is compounded monthly and quoted to the lender using the effective annual rate.

D. The bank loan is compounded annually and quoted to the lender using the effective annual rate.

E. The bank loan is compounded monthly and quoted to the lender using the annual periodic rate.

Solutions

Expert Solution

E - The most common bank loan is compounded monthly, and the interest rate is quoted using APR (annual periodic rate)

B and D are incorrect. Most common bank loans are not compounded annually, but monthly.

A and C are incorrect - monthly periodic rate and effective annual rate are not used to quote the interest rate

jeff jeffy answered 1 year ago

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