Question

In: Finance

The interest rate charged per period multiplied by the number of periods per year is called...

The interest rate charged per period multiplied by the number of periods per year is called the

effective annual rate.

compound interest rate.

periodic interest rate.

annual percentage rate.

daily interest rate.

Solutions

Expert Solution

Answer : annual percentage rate (APR)

The interest rate charged per period multiplied by the number of periods per year is annual percentage rate (APR). It is the yearly rate of interest which is to be paid by an individual on a loan, or he receives on a deposit account.

The effective annual rate is the real return earned on an investment as a result of compounding over a given period of time.

Compound interest is the interest on a loan or a deposit account calculated on both the initial principal and the accumulated interest for compounding periods.

A periodic interest rate is the interest rate that is charged on a loan, or a deposit account over a specific period of time.

A daily interest rate is used to calculate the amount of interest by multiplying the rate by the amount of loan or investment at the end of each day.


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