Question

9. You need $10'000 for 2 years and you go to your bank asking for a loan. The loan officer gives you the following options: a) 12% APR, yearly compounding b) 11.5% APR, semi-annually compounding c) 11% APR, monthly compounding Which one would you choose and why? Page 2 of 3 10. Which statement is true and which one is false. Explain in 2 lines max. a. Interest rate on a 20-year mortgage is higher than the interest rate on a 30-year mortgage. b. Interest rate on credit card debt is higher than the interest rate on a mortgage. c. Interest rate on a AAA corporate bond is lower than interest rate on a BB corporate bond with the same maturity. d. Interest rate on a AAA corporate bond with 1 year until maturity is necessarily higher than interest rate on a 10-year treasury bond.

          9. You need $10'000 for 2 years and you go to your bank asking for a loan. The loan officer
gives you the following options:
a) 12% APR, yearly compounding
b) 11.5% APR, semi-annually compounding
c) 11% APR, monthly compounding
Which one would you choose and why?
Page 2 of 3
10. Which statement is true and which one is false. Explain in 2 lines max.
a. Interest rate on a 20-year mortgage is higher than the interest rate on a 30-year
mortgage.
b. Interest rate on credit card debt is higher than the interest rate on a mortgage.
c. Interest rate on a AAA corporate bond is lower than interest rate on a BB corporate
bond with the same maturity.
d. Interest rate on a AAA corporate bond with 1 year until maturity is necessarily higher
than interest rate on a 10-year treasury bond.

9. You need 10'000 for 2 years and you go to your bank asking for a loan. The loan officer
gives you the following options:
a) 12% APR, yearly compounding
b) 11.5% APR, semi-annually compounding
c) 11% APR, monthly compounding
Which one would you choose and why?
Page 2 of 3
10. Which statement is true and which one is false. Explain in 2 lines max.
a. Interest rate on a 20-year mortgage is higher than the interest rate on a 30-year
mortgage.
b. Interest rate on credit card debt is higher than the interest rate on a mortgage.
c. Interest rate on a AAA corporate bond is lower than interest rate on a BB corporate
bond with the same maturity.
d. Interest rate on a AAA corporate bond with 1 year until maturity is necessarily higher
than interest rate on a 10-year treasury bond.

Added by Jacqueline Z.

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