Question

If we are given a periodic interest rate, say a monthly rate, we can find the nominal annual rate by multiplying the periodic rate by the number of periods per year. a. True b. False

Answer 1

Answer:

a. True

Explanation:

A periodic interest rate can be defined as an interest rate that is realizable on an investment such as securities (bonds) or charged on a loan over a specific period of time.

Mathematically, it is given by the formula;

$Periodic \; interest \; rate = \frac {annual \; interest \; rate}{number \; of \; compounding \; periods}$

Hence, if we are given a periodic interest rate, say a monthly rate, we can find the nominal annual rate by multiplying the periodic rate by the number of periods per year.