F9 Flashcards
1
Q
effective annual rate (EAR)
A
amount of interest that will be earned in the end of the year
considers compounding
2
Q
annual percentage rate (APR)
A
simple interest, without compounding
3
Q
how are interest rate determined?
A
Inflation
Interest rate policy (central banks guide the economy)
The yield curve (relationship between investment term and interest rate)
Interest rate expectations
4
Q
nominal interest rate
A
rate money will grow if they are invested
5
Q
real interest rate
A
rate of growth of purchasing power
nominal interest rate-rate of inflation
