Indicate whether the statement is true or false. 1. Given 10 and 30 year loans with the same interest rate, the 30 year loan results in a lower periodic payment. a. True b. False
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Indicate whether the statement is true or false.
1. Given 10 and 30 year loans with the same interest rate, the 30 year loan results in a lower periodic payment.
a. True
b. False
Step by step
Solved in 3 steps with 4 images
- which of the following statements are true? 1. there is an inverse relationship between interest rates and future vales 2. the effective annual interest rate (EAR) will be higher than the annual percentage rate (APR) for a loan that compounds interest annually 3. there is an inverse relationship between present value and interest rates 4. all else equal, the more frequent interest in compounded on a loan, the more interest you will have to pay.pls refer to the image attached, 1. suppose that you have the capacity to pay, would you rather borrow a loan that is amortized monthly, or one that is amortized quarterly? 2. what is your considerations when availing a loan? (quantitative or qualitative considerations) Discuss.A borrower would pay more total interest on a 10-year loan under an equal principal payment plan than on the same loan amortized under an equal total payment plan. A. True B. False
- Over the duration of the loan, the total loan payment is... ... gradually increasing for "amortizing loans with fixed total payments". This statement is [ Select ] ["true", "false"] . ... gradually increasing for "amortizing loans with fixed principal payments". This statement is [ Select ] ["true", "false"] .Which statement is true about an annual percentage rate (APR)? A) it is of little interest to the average borrower B) it is a simple way to compare all the various elements of different loans C) it is reduced every time you make an payment D) it is equal to the interest rate times the principalSuppose that you want to take out a loan and that your local bank wants to charge you an annual real interest rate equal to 3%. Assuming that the annualized expected rate of inflation over the life of the loan is 1%, determine the nominal interest rate that the bank will charge you. What was the actual real interest rate on the loan if, over the life of the loan, actual inflation is 0.5%?
- What discount rate should a lender charge to earn an interest of 2 1/4 % on a 90-day loan? Hint: An interest rate r and discount rate d are said to be equivalent if these two simple rates give the same present value for an amount due in the future. Thus, r = d/(1 - dt) and d = r/(1 + rt)Which of the following statements is CORRECT? Question 2 options: a) The proportion of the payment that goes toward interest on a fully amortized loan increases over time. b) An investment that has a nomiral rate of 6% with semiannual payments will have an effective rate that is smaller than 6%. c) If a loan or investment has annual payments, then the effective, periodic, and nominal rates of interest will all be different. d) The present value of a 3-year, $150 ordinary annuity will exceed the present value of a 3-year, $150 annuity due. e) if a loan has a nominal annual rate of 7%, then the effective rate will never be less than 7%.Explain in general terms how the portion s of loan payment going to principal and interest change over the life of the loan . A. Installment loans gradually pay down the loan principal while the payments remain the same . Therefore , the interest due each month gradually decreases and the amount paid toward the principal gradually increases. B. Installment loans gradually pay down the loan principal while the payments remain the same. Therefore , the interest remains the same and the amount paid toward the principal gradually decreases. C. Installment loans gradually pay down the loan principal while the payments remain the same . Therefore , the interest remains the same and the amount paid toward the principal gradually increases . D. Installment loans gradually pay down the loan principal while the payments remain the same .Therefore, the interest due each month gradually increases and the amount paid toward the principal gradually decreases.
- Consider two 1-year loans with a principal of $1 million and a default probability of 2% each. Assume that if one loan defaults, the other does not. Assume that in the event of default, the loan leads to a loss that can take any value between $0 and $1 million with equal probability, i.e., the probability that the loss is higher than $ ? million is 1 − ?. If a loan does not default, it yields a profit equal to $0.02 million. a) Compute the 1-year 99% Value at Risk (VaR) and Expected Shortfall (ES) of a single loan.Please include the excel formula If the following is a loan, identify a) the principal amount, b) the monthly interest rate, and c) the length of the loan in months. Determine if the following situation is an investment or a loan. If the following is an investment, identify a) if it is a one-time or recurring investment, b) the number of compounding periods per year and c) the total number of compounding periods. If the following is a loan, identify a) the principal amount, b) the monthly interest rate, and c) the length of the loan in months. Ashtyn purchased new appliances for her house for a total of $5,744. The store she buys the appliances from offers an annual simple interest rate of 8.5% with no down payment and monthly payments for 3 years. This situation represents a(n) . a) b) c) What will be your monthly payments? Use Excel to calculate the value.1. What is the different between an ordinary annuity and an annuity due? Which occursmore in practice? Give a common example of both. 2. Using the example of a savings account, explain the difference between the effectiveannual rate and the annual percentage rate. 3. A mortgage instrument pays $1.5 million at the end of each of the next two years. Aninvestor has an alternative investment with the same amount of risk that will payinterest at 8% compounded semiannually. what the investor should pay for themortgage instrument?
