Nominal and Effective Interest Rates (Grade 11 NSC Matric Mathematics): Quizzes
📚Quizzes
Practise the questions
10 questions from this quiz
ShowHide
Practise the questions
10 questions from this quiz
What is a nominal interest rate?
What is a nominal interest rate?
Rate compounded more than once per year
What does an effective interest rate show?
What does an effective interest rate show?
The real percentage increase over one year
When interest is compounded more than once per year, which rate is higher?
When interest is compounded more than once per year, which rate is higher?
Effective rate is always higher
Why is the effective rate higher than the nominal rate?
Why is the effective rate higher than the nominal rate?
Interest on interest is earned more often
What happens to the effective rate when compounding becomes more frequent?
What happens to the effective rate when compounding becomes more frequent?
The effective rate increases
23% p.a. compounded monthly equals what effective rate?
23% p.a. compounded monthly equals what effective rate?
25.59% per annum
In the formula , what does represent?
In the formula , what does represent?
Number of compounding periods per year
When borrowing money, which effective rate should you choose?
When borrowing money, which effective rate should you choose?
The lower effective rate
Before comparing different interest rates, what must you do?
Before comparing different interest rates, what must you do?
Convert all rates to effective rates
9% effective equals what nominal rate compounded quarterly?
9% effective equals what nominal rate compounded quarterly?
8.71% per annum