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mars1129 [50]
3 years ago
11

Suppose that Community Bank offers to lend you $10,000 for one year at a nominal interest rate of 8.00%, but you must make inter

est payments at the end of each quarter and then pay off the $10,000 principal amount at the end of the year. What is the effective annual rate of the loan?
a. 8.24%
b. 8.45%
c. 8.66%
d. 8.88%
e. 9.10%
Business
1 answer:
Advocard [28]3 years ago
8 0

Answer:

a. 8.24%

Explanation:

The formula to compute the effective annual rate of the loan is shown below:

= (1 + nominal interest rate ÷ periods)^ number of period - 1

= (1 + 8% ÷ 4)^4 - 1

= (1 + 2%)^4 - 1

= 1.02^4 - 1

= 8.24%

As the interest rate is made on a quarterly basis and we know that there are four quarters in a year and we take the same in the computation part

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Answer:

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Expansionary fiscal policies are government actions of reducing taxes or increasing expenditure on stimulus programs. Reducing taxes increases the disposable income of consumers. It encourages firms to expand their businesses.  An increase in disposable means consumers will have more money to spend, which boosts aggregate demand. If the government spends money on stimulus programs such as the construction of roads and public buildings, it creates employment and income for more people.

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