Topic 2

Question 1

stated or nominal interest rate (NIR)

Answer 1

a quoted interest rate where interest is charged more frequently than the basis on which the interest is quoted. The interest rate actually used to calculate the interest charge is taken as a proportion of the quoted nominal rate and compounded up to the full period of the norminal rate

Question 2

effective annual interest rate (EAR)

Answer 2

the actual rate of interest to be earned or paid