Question

In: Finance

1. The payment made each period on an amortized loan is constant, and it consists of...

1. The payment made each period on an amortized loan is constant, and it consists of some interest and some principal. Which of the following statement is correct?

2. If a bank compounds savings accounts annually, the effective annual rate is greater than the nominal rate. True False

3. The present value of a future cash flow will be greater if we increase the discounted interest rate and compound more frequently. True False

4. A bank loan has annual percentage rate APR = 6%, compounding monthly. What are the nominal annual rate, the periodic rate, and the effective annual rate of the loan, respectively?

Please show work using excel

Expert Solution

1)

Payment made each period on an amortized loan is called EMI or Equated monthly instalments and each EMI consists of Principal and Interest repayment,

2)

If compounding period is annual, then effective annual rate is equal to nominal rate. Whenever, the compounding periods are more than one period, then EAR > Nominal rate

Answer is False

3)

If discounted rate is increased, then present value of cash flow decreases due to a higher discounting effect.

Answer is True

4)

Formulae

jeff jeffy answered 2 years ago

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