Orlando has a loan with an effective interest rate of 7. 918%, compounded annually. Which of the following must be true? I. In t
1 answer:
The correct option is B, II. only.
Given to us,
I. In the effective rate formula, n is equal to one.
Effective interest rate formula,
where,
r is the effective interest rate,
i is the stated interest rate,
n is the number of compounding periods per year.
According to the question the compounding periods per year is not given to us. Also, loans are taken for a longer period of time.
Thus, we can conclude that statement is false.
II. The nominal rate is 7. 918%.
nominal rate = real interest rate + inflation rate,
but as it is not mentioned in the question about the inflation rate. the statement is true to us. Assuming the inflation rate is 0%.
Thus, we can conclude that statement is true.
III. The Federal Funds Rate is static.
This statement is false, as the no information is given about this statement also this can not be concluded through assumption.
Thus, we can conclude that statement is false.
Hence, The correct option is B, II. only.
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Answer:
<u></u>
- <u>a) P(X=1) = 0.302526</u>
- <u>b) P(X=5) = 0.010206</u>
- <u>c) P(X=3) = 0.18522</u>
- <u>d) P(X≤3) = 0.92953</u>
- <u>e) P(X≥5) = 0.010935</u>
- <u>f) P(X≤4) = 0.989065</u>
Explanation:
Binomial experiments are modeled by the formula:
Where
- P(X=x) is the probability of exactly x successes
- p is the probability of one success, which must be the same for every trial, and every trial must be independent of other trial.
- n is the number of trials
- 1 - p is the probability of fail
- there are only two possible outcomes for each trial: success or fail.
<u>a.) P (x=1)</u>
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<u>b.) P (x=5)</u>
<u>c.) P (x=3)</u>
Using the same formula:
<u>d.) P (x less than or equal to 3)</u>
- P(X≤3)= P(X=3) + P(X=2) + P(X=1) + P(X=0)
Also,
- P(X≤3) = 1 - P(X≥4) = 1 - P(X=4) - P(X=5) - P(X=6)
You can use either of those approaches. The result is the same.
Using the second one:
- P(X=4) = 0.059335
- P(X=5) = 0.010206
- P(X=6) = 0.000729
- P(X≤3) = 1 - 0.05935 - 0.010206 - 0.000729 = 0.92953
<u>e.) P(x greather than or equal to 5)</u>
- P(X≥5) = P(X=5) + P(X=6)
- P(X≥5) = 0.010206 + 0.000729 = 0.010935
<u>f.) P(x less than or equal 4)</u>
- P(X≤4) = 1 - P(X≥5) = 1 - P(X=5) - P(X=6)
- P(X≤4) = 1 - 0.010206 - 0.000729 = 0.989065