Which type of interest rate saves you the most money if you carry a balance on a loan from one month to the next?A.Simple interest rateB.Annual percentage yieldC.Effective rateD.Compound interest rateSUBMITarrow_backPREVIOUS
Question
Which type of interest rate saves you the most money if you carry a balance on a loan from one month to the next?A.Simple interest rateB.Annual percentage yieldC.Effective rateD.Compound interest rateSUBMITarrow_backPREVIOUS
Solution
The type of interest rate that saves you the most money if you carry a balance on a loan from one month to the next is C. Effective rate.
Here's why:
A. Simple interest rate: This is calculated on the principal, or original, amount of a loan. It does not take into account interest that has been added to the loan.
B. Annual percentage yield (APY): This is a percentage that tells you how much you will earn or owe over a year. APY includes compound interest, but it's more commonly used for investments rather than loans.
C. Effective rate: This is the interest rate when compounding occurs more frequently than once a year. It can be lower than the nominal rate and save you money if you're carrying a balance from month to month.
D. Compound interest rate: This is when the interest is added to the principal amount and then interest is charged on the new total. This can make a loan more expensive.
So, the effective rate is typically the best option if you're carrying a balance on a loan from one month to the next because it can result in lower interest costs.
Similar Questions
Which type of account pays more interest than a savings account but requires you to leave your money untouched for a period of time?A.Money market accountB.Flexible spending accountC.Checking accountD.Certificate of depositSUBMITarrow_backPREVIOUS
Which of the following statements best defines compound interest?Group of answer choicesInterest that grows with a variable rate of change that is earned only if you deposit money into an account every month.Interest that grows with a constant rate of change that is calculated both on money you deposit and on money you have earned in interest.Interest that grows with a variable rate of change that is calculated both on money you deposit and on money you have earned in interest.Interest that grows with a constant rate of change that is calculated only when you are in debt.Interest that grows with a variable rate of change that is earned only on money that you deposit.
Which type of borrowing option would most likely result in the borrower paying the highest amount of interest?A.A card with a high simple interest rateB.A card with a high compound interest rateC.A card with a low compound interest rateD.A card with a low simple interest rate
f you want a higher interest rate and need to make only a few transactions per month, which type of account should you choose?A.Savings accountB.Money market accountC.Checking accountD.Certificate of deposit
Multiple Choice QuestionThe pure rate of interest is best approximated by which of the following?Multiple choice question.The interest paid on long-term, virtually riskless securitiesThe interest paid on long-term, high-risk securitiesThe interest rate on any particular type of loan in terms of the supply of and demand for funds available for lendingThe interest paid on short-term, high-risk securities
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.