Financial Literacy Quiz: Nominal Effective Interest

The effective annual interest rate for a loan with a nominal rate of 8% compounded monthly is (a)   .

• 8.00%
• 8.30%
• 8.50%
• 8.75%

What does the term 'compounding interest' refer to?

• Interest rate stated without the effect of compounding

• Interest rate that remains constant over time

• Interest rate with compounding taken into account

• Interest added periodically into the original account

The value of a $10,000 school loan at 8% interest compounded monthly after 4 years will be (a)   .

• $12,000
• $13,000
• $13,756.66
• $13,500

The effective rate for a savings account if the nominal rate is 4.5% compounded daily is (a)   .

• 4.70%
• 4.60%
• 4.50%
• 4.80%

The nominal rate for a credit card account if the effective rate is 19.5618% compounded monthly is (a)   .

• 21%
• 18%
• 20%
• 19%

Use the TVM SOLVER to answer the following. The monthly payment amount for a $32,035 convertible with a 60-month period compounded monthly is ​ (a)   .

• $630.00
• $620.00
• $600.00
• $636