The principal and interest What is the true definition of Compound interest? Main part amount you are borrowing



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Money and Banking


Indicate the correct parts of loan payment:
The principal and interest
What is the true definition of Compound interest?
Main part amount you are borrowing
Simple interest rate is:
Is the charge for the time you have the loan
Find the correct explanation of Nominal rate:

  • The interest rate makes no allowance for inflation, and it is more precisely referred to as the nominal interest rate.

Find the incorrect statement about Yield to maturity?

Chose the correct answer that lists potential ways to increase wealth from buying securities:


  • Suppose you buy a stock or bond and hold onto it for a year. How much have you earned by holding the security? You have potentially increased your wealth in two ways:

  • 1. The security may pay you directly. A bond may yield a coupon payment. If you own a company’s stock, you do not directly receive the company’s profits, but you may receive a dividend.

  • 2. The price of the security may change. If the price rises, you own a more valuable asset, so your wealth rises. This is called a capital gain. Of course the price may also fall, causing a capital loss.

Find the incorrect statement about Capital Gain:


The price of the security may change. If the price rises, you own a more valuable asset, so your wealth rises. This is called a capital gain.
What is Capital loss?
Of course the price may also fall, causing a capital loss.
Suppose in 2020 you buy a bond for $90. In 2021, the bond makes a coupon payment of $4 and the price rises to $94. Plugging these numbers into the formula, the rate of return is:
0,08888888
Suppose in 2021 you buy a bond for $100. In 2022, the bond makes a coupon payment of $4 and the price rises to $110. Plugging these numbers into the formula, the rate of return is:
0,14
Suppose in 2017 you bought a bond for $80. In 2018, the bond made a coupon payment of $5 and the price rose to $85. Plugging these numbers into the formula, the rate of return is:
0,125
Indicate the Correct statement of The Loanable Funds Theory:
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