What would cause the annual interest rate to be different from the annual effective rate or yield?

Q: Explain the term Annual Effective Yields?

A: Annual effective yield: Annual effective yield is defined as the simple rate of interest that gives…

Q: What is the rela1ionship between Annual  Percentage Rate and the interest period?

A: Answer: Annual percentage rate represents the interest rate which also takes additional payments…

Q: The effective interest rate over this period equals ...

A: Effective Interest Rate: It refers to the annual rate of interest which takes into account the…

Q: Can nominal interest rates be negative?

A: Nominal interest rate is the rate that is paid to lender for the amount or money borrowed.

Q: What does the annual effective yield represent?

A: Yield refers to the rate of return that is received by the owner of the security who has invested in…

Q: Why do level or constant monthly mortgage payments increase so sharply during periods of inflation?…

A: During the period of inflation, everybody needs to obtain the full attention and does not needs to…

Q: What security provides a good estimate of the short-term nominalrisk-free rate?

A: T-bills are the treasury bills issued by the government. These bills are risk-free and the rate of…

Q: What was her dollar-weighted annual yield rate? Compute it exactly, and compare to using the…

A: Dollar weighted annual rate is that rate of return where present cash inflows are same as present…

Q: What will be the Net interest income variation for the cumulative GAP, if interest rates have a 1%…

A: The potential loss from unexpected changes in interest rates can significantly alter a bank’s…

Q: Which of the following is not needed to compute the present value of an investment?a. The length of…

A: Present value:   Present value refers to the present worth of the money that is received in future…

Q: What security provides a good estimate of the long-term nominalrisk-free rate?

A: Risk-free Rate is the estimation of the rate that is earned on the securities or the investments…

Q: Which tend to be more volatile, short- or long-term interest rates? Long-term interest rates…

A: short term interest rates are more volatile than long term interest rate.

Q: How is the market interest rate in the short-term and long-term financial market affected under the…

A: Introduction : In simple words, the pure expectation theory refers to the market finance theory…

Q: Explain what the yield curve is, what determines its shape, and how you can use the yield curve to…

A: The yield curve: The yield curve depicts the yields of bonds with similar credit ratings but with…

Q: What happens to the present value of some fixed dollar amount to be received in the future as time…

A: Present value of some fixed dollar amount  is obtained by discounting the future cash flows using an…

Q: The elasticity of the change of the price of debt toward the change in interest rate is the absolute…

A: Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change…

Q: What will be the Effect of the After-Tax Interest Cost on Loan Decisions?

A: Interest cost for loan borrowers depends mainly upon the rate of interest charged by lenders.…

Q: Suppose interest rates in the economy increase. How would such a change affect the costs of both…

A: In Finance, the Capital Asset Pricing Model is a model used to determine a theoretically appropriate…

Q: How does the present value of a future payment change as the time to receipt islengthened? As the…

A: Present Value of a future payment is calculated  based on the length of time and the interest rate…

Q: Can the actual real rate of interest be negative? When ? Can the expected real rate be negative?

A: Yes, the actual real interest rate can be negative. This can happen when the actual inflation rate…

Q: When the quantity of a financial security supplied or demanded changes at every given interest rate…

A: Explanation: Interest rate shifts (i.e., the price of financial capital) are creating a shift along…

Q: What refers to the cost of borrowing money or the amount earned by a unit principal per unit time?…

A: Solution Rate of Interest  The rate of interest is that the quantity a lender charges for the use of…

Q: A) What was your expected yield to maturity? B) What was your actual rate of return?

A: The yield to maturity (YTM) is the annual percentage rate of return on a bond if the investor…

Q: How do inflationary expectations influence interest rates on mortgage loans?

A: Inflation: It is the rate at which the purchasing power of the money decreases every year.…

Q: In general, what effect would a reduction in risk have on “going-in” cap rates? What would this…

A: Capitalization rate is the projected rate of return percentage that a property will make on the…

Q: What is nominal annual interest rate?

A: Interest rate is a crucial part of any financial instrument. There are two types of interest rates:…

Q: What is the formula used in annuity due if your looking for the compounded interest rate with given…

A: Present Value of an Annuity is used when a business wants to know how much amount it should pay for…

Q: Why is the U.S. Treasury yield considered the base interest rate?

A: Bondholders, higher than any other form of the investor, are concerned about future interest rates.…

Q: How would an increase in the interest rate or a decrease in the number of periods until the payment…

A: Interest rate is defined as an amount of an interest due per period as the proportion of amount,…

Q: Why do most firms use a market interest rate?

A: The effective annual rate of interest is the actual or the real rate of interest paid or received…

Q: When calculating present value, the the interest rate, the smaller the present value amount. smaller…

A: Present value- In finance and accounting, the notion of present value is extremely important. The…

Q: The nominal interest rate is always greater than the effective interest rate.

A: False, effective rate of interest is always greater than nominal interest rate if period of…

Q: What is the annual rate of return för the

A: An annualized rate of return is the equivalent annual return received by an investor over a specific…

Q: When computing an interest or growth rate, the rate will increase the smaller the future value,…

A: Future value refers to the worth of the present sum or a series of cash flows at a future date. It…