Which one of the following statements is NOT true?

Which one of the following statements is NOT true?

A) The correct way to annualize an interest rate is to compute the effective annual interest rate (EAR).
B) The APR is the annualized interest rate using simple interest.
C) The correct way to annualize an interest rate is to compute the annual percentage rate (APR).
D) You can find the interest rate per period by dividing the quoted annual rate by the number of compounding periods.

Answer: C

Which one of the following statements is NOT true?

Which one of the following statements is NOT true?

A) The Truth-in-Lending Act was passed by Congress to ensure that the true cost of credit was disclosed to consumers.
B) The Truth-in-Savings Act was passed to provide consumers an accurate estimate of the return they would earn on an investment.
C) The above two pieces of legislation require by law that the APR be disclosed on all consumer loans and savings plans.
D) All of the above are true statements.

Answer: D

Which one of the following statements is NOT true?

Which one of the following statements is NOT true?

A) The APR is the appropriate rate to do present and future value calculations.
B) The EAR is the appropriate rate to do present and future value calculations.
C) The EAR is the true cost of borrowing and lending.
D) The EAR takes compounding into account.

Answer: A

The true cost of lending is the

The true cost of lending is the

A) annual percentage rate.
B) effective annual rate.
C) quoted interest rate.
D) none of the above.

Answer: B

The true cost of borrowing is the

The true cost of borrowing is the

A) annual percentage rate.
B) effective annual rate.
C) quoted interest rate.
D) periodic rate.

Answer: B

Which one of the following statements is TRUE about the effective annual rate (EAR)?

Which one of the following statements is TRUE about the effective annual rate (EAR)?

A) The effective annual interest rate (EAR) is defined as the annual growth rate that takes compounding into account.
B) The EAR conversion formula accounts for the number of compounding periods and, thus, effectively adjusts the annualized interest rate for the time value of money.
C) The EAR is the true cost of borrowing and lending.
D) All of the above are true.

Answer: D