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Which of the following statements is true? Give all correct answers.

a.

Effective annual rate > annual percentage rate

Effective annual rate > annual percentage rate

b. Effective annual

rate = annual percentage rate

rate = annual percentage rate

c. Effective annual rate < annual

percentage rate

percentage rate

3. When you increase the number of payments per period,

why does the total cash payments times the number of payments in the

period not equal the original single payment for the period? (In other

words, why does twelve times a monthly payment on a loan with a positive

interest rate not equal the required annual payment on the same loan

amount with the same inter- est rate?)

why does the total cash payments times the number of payments in the

period not equal the original single payment for the period? (In other

words, why does twelve times a monthly payment on a loan with a positive

interest rate not equal the required annual payment on the same loan

amount with the same inter- est rate?)

4. Explain why the real interest

rate is the reward for saving.

rate is the reward for saving.

5. What does the term risk-free interest

mean, and why do we usually use the U.S. Treasury bill yield as the

risk-free rate?

mean, and why do we usually use the U.S. Treasury bill yield as the

risk-free rate?

6. Why does a mortgage typically have a lower interest

rate than a car loan?

rate than a car loan?

7.on average, which factor do you think contributes

more to the nomin free rate, inflation or the real rate?

more to the nomin free rate, inflation or the real rate?