Interest 03 Flashcards
1
Q
- An INTEREST RATE is:
A
the rate at which interest is paid by a BORROWER (debtor) for the use of money borrowed from a LENDER (creditor).
2
Q
- Specifically, the INTEREST RATE (I/m) is:
A
a percent of the PRINCIPAL ( P ) paid a CERTAIN AMOUNT OF TIMES ( m ) per period (usually quoted by annum).
3
Q
- INTEREST RATES are normally expressed as:
A
a PERCENTAGE OF THE PRINCIPAL for a PERIOD OF ONE YEAR.
4
Q
- What is commonly referred to as the INTEREST RATE by the MEDIA is:
A
THE RATE OFFERED ON OVERNIGHT DEPOSITS by the CENTRAL BANK, or other authority, ANNUALIZED.
5
Q
- The TOTAL INTEREST RATE on a loan or investment depends on:
A
the TIMESCALE the interest IS CALCULATED ON, because interest may be compounded.
6
Q
- What is APR ?
A
ANNUALIZED PERCENTAGE RATE. It describes the interest rate for a WHOLE YEAR (annualized), rather than just a monthly fee/rate.
7
Q
- In general, APR can be of two types:
A
NOMINAL APR
EFFECTIVE APR
8
Q
- What is the NOMINAL APR?
A
It is the SIMPLE INTEREST RATE (for one year).
9
Q
- What is the EFFECTIVE APR?
A
It is the FEE PLUS COMPOUND INTEREST RATE (for one year).
