Question

The more compounding periods per year, the lower the effective rate of return. T or F

The stated interest rate is the real or true rate of return on an investment T or F

Compound interest yields considerably higher interest than simple interest. T or F

Interest is the rental fee charged by a lender to a business or individual for the use of money. T or F

Exact interest method uses 365 days as the time factor denominator in the simple interest formula T or F

The total payback of principal and interest is known as compound amount of a loan. T or F

Answer 1

(1)

Question:

The more compounding periods per year, the lower the effective rate of return

Correct option:

F

Explanation:

As the number of compounding periods increases, so does the annual effective rate.

(2)

Question:

The stated interest rate is the real or true rate of return on an investment

Correct option:

F

Explanation:

A real rate of return is the annual percentage return realized on aninvestent which is adjusted for changes in prices due to external factors.

(3)

Question:

Compound interest yields considerably higher interest than simple interest.

Correct option:

T

Explanation:

Compound interest yields considerably higher interest than simple interest.because compound interest allows funds to grow faster rate.

(4)

Question:

Interest is the rental fee charged by a lender to a business or individual for the use of money.

Correct option:

T

Explanation   Interest is a leasing charge to the borrower for the use of an asset.

(5)

Question:

Exact interest method uses 365 days as the time factor denominator in the simple interest formula

Correct option:

F

Explanation: Exact interest method uses 365/360 calculation method.

(6)

Question:

The total payback of principal and interest is known as compound amount of a loan.

Correct option:

F

Explanation:

The total payback of principal and interest is known as amount of a loan.