Question 15: All of the following are interest rates except A) Return on investm

Question

Question 15: All of the following are interest rates except A) Return on investment B) MARR C) Accrued interest D) Rate of retum Question 16: When the interest rate is 10% per year, all of the following are equivalent to $5,000 now except A) B) C) D) $4,545 one year ago. $5,500 one year hence. $4,021 two years ago. $6,050 two years hence. Question 17: An interest rate of 1% per month is the same as: A) Nominal 3% per quarter compounded monthly Effective 12.683% Nominal 12% per year compounded monthly. All of the above. per year compounded monthly. C) D) Question 18: An interest rate o effective 12% per year compounded monthly is nearest to: A) 1% per month. 3.04% per quarter. 6.15% per semiannual period. Nominal 1 1.39% per year compounded monthly. D) Question 19: A nominal interest is similar to a (n): A) effective interest rate. B) simple interest rate. C) compound interest rate. D) inflated interest rate. Question 20: When no compounding period is given with an interest rate, the compounding period: A) Is equal to the interest period. B) Is assumed to be monthly C Cannot be determined from the statement. D) Must be less than interest period. Question 21: When interest is compounded continuously: A) The cash flow must also occur continuously. B) The cash flow must be converted into continuous cash flow. C) The interest rate must be converted into an annual rate. D) None of the above.

Explanation / Answer

15- C (It is an absolute value)

16- C (It would be 4132)

17- B (1.01^12)

18- D (MONTHLY INTEREST OF 0.949%)

19-B

20- A (interest period is a hint for the calculation)

21- B

None of the above MAY NOT BE RATIONAL with a logic that the reason for continuous compounding is to get incremental benefit of the accrued amount with perpetual increase. For continuious cash flow it may suffice the requirement.

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