Question

Scenario ONE: Homecare Inc. took out a $1m loan from Heachem Bank, to finance the expansion of its elder care business into the neighboring town. The APR (annual percentage rate) = 7.45%, compounded monthly, with monthly loan payments due over the 10 year life of the loan. 1. Which of the following terms could be substituted for APR in Scenario ONE? a. Yield. b. Real interest rate. c. Nominal interest rate. d. Effective interest rate. 2. What is the monthly interest rate on the loan? a. 3.725% b. 1.8625% c. 0.6208% d. 7.45% 3. What is the effective annual interest rate ($i_a$) on the loan? a. 7.7097% b. 7.8021% c. 7.9405% d. 7.45% 4. Which of the following factors is used by the bank to calculate the monthly loan payments? a. Equal-Payment Conversion (A/G, i, N) b. Present Worth (P/A1, g, i, N) c. Sinking Fund (A/F, I, N) d. Capital Recovery (A/P, i, N) 5. What are the monthly payments on the loan? a. $11,843.89 b. $13,453.15 c. $103,446.09 d. $10,031.38

          Scenario ONE: Homecare Inc. took out a $1m loan from Heachem Bank, to finance the expansion of its
elder care business into the neighboring town. The APR (annual percentage rate) = 7.45%, compounded
monthly, with monthly loan payments due over the 10 year life of the loan.
1. Which of the following terms could be substituted for APR in Scenario ONE?
a. Yield.
b. Real interest rate.
c. Nominal interest rate.
d. Effective interest rate.
2. What is the monthly interest rate on the loan?
a. 3.725%
b. 1.8625%
c. 0.6208%
d. 7.45%
3. What is the effective annual interest rate ($i_a$) on the loan?
a. 7.7097%
b. 7.8021%
c. 7.9405%
d. 7.45%
4. Which of the following factors is used by the bank to calculate the monthly loan payments?
a. Equal-Payment Conversion (A/G, i, N)
b. Present Worth (P/A1, g, i, N)
c. Sinking Fund (A/F, I, N)
d. Capital Recovery (A/P, i, N)
5. What are the monthly payments on the loan?
a. $11,843.89
b. $13,453.15
c. $103,446.09
d. $10,031.38

Scenario ONE: Homecare Inc. took out a 1m loan from Heachem Bank, to finance the expansion of its
elder care business into the neighboring town. The APR (annual percentage rate) = 7.45%, compounded
monthly, with monthly loan payments due over the 10 year life of the loan.
1. Which of the following terms could be substituted for APR in Scenario ONE?
a. Yield.
b. Real interest rate.
c. Nominal interest rate.
d. Effective interest rate.
2. What is the monthly interest rate on the loan?
a. 3.725%
b. 1.8625%
c. 0.6208%
d. 7.45%
3. What is the effective annual interest rate (ia) on the loan?
a. 7.7097%
b. 7.8021%
c. 7.9405%
d. 7.45%
4. Which of the following factors is used by the bank to calculate the monthly loan payments?
a. Equal-Payment Conversion (A/G, i, N)
b. Present Worth (P/A1, g, i, N)
c. Sinking Fund (A/F, I, N)
d. Capital Recovery (A/P, i, N)
5. What are the monthly payments on the loan?
a.11,843.89
b. 13,453.15
c.103,446.09
d. 10,031.38

Added by Heidi H.

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