Say you are considering two loans. Loan F has a nominal interest rate of 5.66%, compounded monthly. Loan G has a rate of 6.02%, compounded semiannually. Which loan will give the lower effective interest rate, and how much lower will it be?

c. Loan F’s effective rate will be 0.302 percentage points lower than Loan G’s. More test answers on https://studyhippo.com/financial-math-sem-2/

The demand for loanable funds is downsloping: A. because businesses find that more investments are profitable at low interest rates than at high interest rates. B. because households are willing to save more at high interest rates than at low interest rates. C. only when the nominal interest rate exceeds the real interest rate. D. because the amount of profitable business investment varies directly with the interest rate.

A. because businesses find that more investments are profitable at low interest rates than at high interest rates. More test answers on https://studyhippo.com/ch-16-test-answers/

Nominal interest rate = real interest rate + anticipated inflation

Which of the following formulas is correctly stated? More test answers on https://studyhippo.com/ap-economics-final/

describe the process of determining a nominal interest rate?

the real risk free rate of interest plus multiple risk premiums More test answers on https://studyhippo.com/kin-3804-midterm/

$5000 is put into an empty savings account with a nominal interest rate of 5% No other contributions are made to the account. With monthly compounding, approximately how much interest will have been earned after five years?

NCEES. nominal interest = “non-annual compounding. monthly compounding = “factor name” EQN. ie. F/P. i available. SOLN. 1. problem asking how much $ = interest. 2. given %5 nominal interest rate, find effective interest = ie. * m = 12. 3. use the calculated ie & given $5000 = present worth = P. 4. find the $ = future worth = F for n = 5 years. 5. F= P(F/P). 6. the $ = interest: i available = F – P. $1420. More test answers on https://studyhippo.com/13-engineering-economics-problems/

Suppose that expected inflation rises from 3% to 6% a. how will the real interest rate be affected by this change? b. how will the nominal interest rate be affected by this change? c. what will happen to the equilibrium quantity of loanable funds?

a. the real interest rate will not change. According to the Fisher effect, an increase in expected inflation drives up the nominal interest rate, leaving the real interest rate unchanged. b. the nominal interest rate will rise by 3%. Each additional percentage point of expected inflation drives up the nominal interest rate by 1 percentage point. c. as long as inflation is expected, it does not affect the equilibrium quantity of loanable funds. Both the supply and demand curves for loanable funds are pushed upward, leaving the equilibrium quantity of loanable funds unchanged. More test answers on https://studyhippo.com/module-29/

Typically, nominal interest rates and anticipated inflation rates

move in the same direction More test answers on https://studyhippo.com/macro-economics-test-2-part-2-wiseman/

both lenders and borrowers base their decisions on a. expected real interest rates b. expected nominal interest rates c. real interest rates d. nominal interest rates e. nominal interest rates minus real interest rates.

a. expected real interest rates More test answers on https://studyhippo.com/module-29/

the real interest rate equals the a. nominal interest rate plus the inflation rate b. nominal interest rate minus the inflation rate c. nominal interest rate divide by the inflation rate d. nominal interest rate ties the inflation rate e. federal funds rate

b. nominal interest rate minus the inflation rate More test answers on https://studyhippo.com/module-29/

The nominal interest rate plus the inflation rate is the real interest rate. minus the price interest rate is the inflation rate. minus the inflation rate is the real interest rate. plus the real interest rate is the inflation rate.

minus the inflation rate is the real interest rate. More test answers on https://studyhippo.com/eco202-a9/

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Nominal Interest Rate Flashcards, test questions and answers

Discover flashcards, test exam answers, and assignments to help you learn more about Nominal Interest Rate and other subjects. Don’t miss the chance to use them for more effective college education. Use our database of questions and answers on Nominal Interest Rate and get quick solutions for your test.

What is Nominal Interest Rate?

The nominal interest rate is the amount of interest that is paid on a loan or earned on an investment before any adjustments for inflation. This rate, also known as the stated or quoted rate, is usually the figure used when calculating how much money will be owed in future payments or earned from investments over time. It does not take into account changes in purchasing power caused by inflation.When borrowing money from a lender, such as a bank, it’s important to know what the nominal interest rate is so that you can accurately compare rates offered by different lenders and decide which one is best for your needs. When investing money it’s also important to understand this concept because you want to make sure that your return will be enough to offset any losses due to inflation eroding your purchasing power over time. The nominal interest rate may differ significantly from the real interest rate which takes into account changes in purchasing power due to inflation or deflation. Generally speaking, if there is high inflation then the real interest rate will be lower than the nominal interest rate since its value has been reduced over time; conversely, if there is low or negative inflation then the real interest rate will be higher than the nominal one since its value has increased over time. It can be difficult to determine whether a given nominal interest rate offer reflects good value because of this discrepancy between stated and actual returns but with some careful research you should be able to make an informed decision about whether it’s worth taking out a loan at that particular offered rate or investing your money in something else instead.

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