Math (Nominal Rate)

Question 1

Calculate the nominal rate of interest, compounded quarterly that is equivalent to 1.5% per quarterly compounding period.

(1) 18%
(2) 6%
(3) 12%
(4) 10%

Answer 1

2

1.5% X 4 = .06 X 100 = 6.0%

Question 2

A $170,000 mortgage loan, written at a nominal rate of 7% per annum, compounded annually, has a 2-year contractual term. Payments are made monthly and are based on a 20-year amortization period. Payments are rounded to the next higher dollar. What is the size of the required payments?

(1) $1,307
(2) $1,319
(3) $1,275
(4) $1,297

Answer 2

4

j1=7%
n=20 (240)

170,000 ? 0

=-1296.15

Question 3

A $170,000 mortgage loan, written at a nominal rate of 7% per annum, compounded semi-annually, has a two-year contractual term. Payments are made monthly and are based on a 20-year amortization period. Payments are rounded to the next higher dollar. What is the size of the required payments?

(1) $1,297
(2) $1,298
(3) $1,370
(4) $1,308

Answer 3

4

j2 = 7%(convert to j12)
n=20 (240 months)

170,000 ? 0

=-$1307.82